-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QlXOPX110av9793ET9y5hs4gRqG86d6r/fNIwhPfw8AOF+KXpUz7ED0anzRcVKeP nH2q9L0weENKYopUpjEGxg== 0000950130-99-000277.txt : 19990121 0000950130-99-000277.hdr.sgml : 19990121 ACCESSION NUMBER: 0000950130-99-000277 CONFORMED SUBMISSION TYPE: 10-12B/A PUBLIC DOCUMENT COUNT: 24 FILED AS OF DATE: 19990120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARCH CHEMICALS INC CENTRAL INDEX KEY: 0001072343 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 061526315 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-12B/A SEC ACT: SEC FILE NUMBER: 001-14601 FILM NUMBER: 99508388 BUSINESS ADDRESS: STREET 1: 501 MERRITT 7 STREET 2: P O BOX 4500 CITY: NORWALK STATE: CT ZIP: 06856-4500 BUSINESS PHONE: 2037503729 MAIL ADDRESS: STREET 1: 501 MERRITT 7 STREET 2: P O BOX 4500 CITY: NORWALK STATE: CT ZIP: 06856-4500 10-12B/A 1 AMENDMENT NO. 2 TO FORM 10 As filed with the Securities and Exchange Commission on January 20, 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10/A AMENDMENT NO. 2 GENERAL FORM FOR REGISTRATION OF SECURITIES Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934 ---------------- ARCH CHEMICALS, INC. (Exact name of registrant as specified in its charter) Virginia 06-1526315 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 501 Merritt 7 06851 Norwalk, Connecticut (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (203) 750-3000 ---------------- Securities to be registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which to be so registered each class is to be registered Common Stock, New York Stock Exchange par value $1.00 per share Series A Participating Cumulative New York Stock Exchange Preferred Stock Purchase Rights Securities to be registered pursuant to Section 12(g) of the Act: None - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ARCH CHEMICALS, INC. I. INFORMATION INCLUDED IN INFORMATION STATEMENT AND INCORPORATED IN FORM 10 BY REFERENCE CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10
Item No. Caption Location in Information Statement ---- ------- --------------------------------- 1. Business................ "Summary"; "The Distribution"; "Risk Factors"; "Business"; and "Management's Discussion and Analysis of Financial Condition and Results of Operations." 2. Financial Information... "Summary"; "The Distribution"; "Selected Financial and Operating Data"; and "Management's Discussion and Analysis of Financial Condition and Results of Operations." 3. Properties.............. "Properties." 4. Security Ownership of Certain Beneficial Owners and Management.. "The Distribution" and "Beneficial Ownership." 5. Directors and Executive Officers............... "Management and Executive Compensation" and "Liability and Indemnification of Officers and Directors." 6. Executive Compensation.. "Summary"; "The Distribution"; "Relationship between Olin and the Company after the Distribution"; and "Certain Relationships and Related Transactions." 7. Certain Relationships and Related Transactions........... "Summary"; "The Distribution"; "Relationship between Olin and the Company and the Distribution"; and "Certain Relationships and Related Transactions." 8. Legal Proceedings....... "Legal Proceedings." 9. Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters.... "Summary"; "The Distribution"; "Risk Factors"; and "Dividend Policy." 11. Description of Registrant's Securities to be Registered....... "The Distribution"; "Dividend Policy"; "Description of Capital Stock"; and "Rights Agreement." 12. Indemnification of Directors and Officers............... "Liability and Indemnification of Officers and Directors." 13. Financial Statements and Supplementary Data..... "Summary"; "Selected Financial and Operating Data"; and "Management's Discussion and Analysis of Financial Condition and Results of Operations." 15. Financial Statements and Exhibits............... "Selected Financial and Operating Data"; and "Index to Combined Financial Statements."
II. INFORMATION NOT INCLUDED IN INFORMATION STATEMENT Item 10. Recent Sales of Unregistered Securities Arch Chemicals, Inc. ("Arch Chemicals") was incorporated under the laws of the Commonwealth of Virginia on August 25, 1998. Arch Chemicals issued 100 shares of its Common Stock, par value $1.00 per share, to Olin Corporation, a Virginia corporation ("Olin"), as of October 13, 1998 in consideration of Olin's capital contribution of $100.00. Such issuance was exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof because such issuance did not involve any public offering of securities. Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 15. Financial Statements and Exhibits (a) Financial Statement Schedules: Financial statement schedules are omitted because of the absence of the conditions under which they are required or because the information required by such omitted schedules is set forth in the financial statements or the notes thereto. (b) Exhibits:
Exhibit No. Description ------- ----------- 2 Distribution Agreement** 3.1 Amended and Restated Articles of Incorporation of Arch Chemicals** 3.2 By-laws of Arch Chemicals as amended** 4.1 Specimen Common Share certificate** Amended and Restated Articles of Incorporation of Arch Chemicals 4.2 (filed as Exhibit 3.1 hereto)** 4.3 By-laws of Arch Chemicals as amended (filed as Exhibit 3.2 hereto)** 4.4 Rights Agreement between Arch Chemicals and ChaseMellon Shareholder Services, L.L.C., as Rights Agent** 4.5 Form of Rights Certificate (attached as Exhibit B to the Rights Agreement filed as Exhibit 4.4 hereto)** 10.1 Distribution Agreement (filed as Exhibit 2 hereto)** 10.2 Charleston Services Agreement** 10.3 Chlor-Alkali Supply Agreement** 10.4 Covenant Not To Compete Agreement** 10.5 Sublease** 10.6 Employee Benefits Allocation Agreement** 10.7 Form of Executive Agreement** 10.8 Tax Sharing Agreement** 10.9 Intellectual Property Transfer and License Agreement** 10.10 Information Technology Services Agreement** 10.11 Trade Name License Agreement** 10.12 Transition Services Agreement**
II-1
Exhibit No. Description ------- ----------- 10.13 Arch Chemicals Stock Plan for Nonemployee Directors** 10.14 Arch Chemicals 1999 Long Term Incentive Plan** 10.15 Supplemental Contributing Employee Ownership Plan** 10.16 Supplementary and Deferral Benefit Pension Plan** 10.17 Senior Executive Pension Plan** 10.18 Employee Deferral Plan** 10.19 Key Executive Death Benefits*** 10.20 Form of Arch Chemicals Endorsement Split Dollar Agreement*** 21 List of Subsidiaries of Arch Chemicals*** 27 Financial Data Schedule*** 99.1 Arch Chemicals Information Statement dated January 21, 1999**
- -------- * To be filed by amendment. ** Filed herewith. *** Previously filed. II-2 SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. Arch Chemicals, Inc. (Registrant) /s/ Johnnie M. Jackson, Jr. By: _________________________________ Name: Johnnie M. Jackson, Jr. Title: President and Secretary Date: January 20, 1999 II-3 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- Exhibits To FORM 10 GENERAL FORM FOR REGISTRATION OF SECURITIES Under The Securities Exchange Act of 1934 ---------------- ARCH CHEMICALS, INC. (Exact name of registrant as specified in its charter) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEX TO EXHIBITS
Exhibit No. Description ------- ----------- 2 Distribution Agreement** 3.1 Amended and Restated Articles of Incorporation of Arch Chemicals** 3.2 By-laws of Arch Chemicals as amended** 4.1 Specimen Common Share certificate** 4.2 Amended and Restated Articles of Incorporation of Arch Chemicals (filed as Exhibit 3.1 hereto)** 4.3 By-laws of Arch Chemicals as amended (filed as Exhibit 3.2 hereto)** 4.4 Rights Agreement between Arch Chemicals and ChaseMellon Shareholder Services, L.L.C., as Rights Agent** 4.5 Form of Rights Certificate (attached as Exhibit B to the Rights Agreement filed as Exhibit 4.4 hereto)** 10.1 Distribution Agreement (filed as Exhibit 2 hereto)** 10.2 Charleston Services Agreement** 10.3 Chlor-Alkali Supply Agreement** 10.4 Covenant Not To Compete Agreement** 10.5 Sublease** 10.6 Employee Benefits Allocation Agreement** 10.7 Form of Executive Agreement** 10.8 Tax Sharing Agreement** 10.9 Intellectual Property Transfer and License Agreement** 10.10 Information Technology Services Agreement** 10.11 Trade Name License Agreement** 10.12 Transition Services Agreement** 10.13 Arch Chemicals Stock Plan for Nonemployee Directors** 10.14 Arch Chemicals 1999 Long Term Incentive Plan** 10.15 Supplemental Contributing Employee Ownership Plan** 10.16 Supplementary and Deferral Benefit Pension Plan** 10.17 Senior Executive Pension Plan** 10.18 Employee Deferral Plan** 10.19 Key Executive Death Benefits*** 10.20 Form of Arch Chemicals Endorsement Split Dollar Agreement*** 21 List of Subsidiaries of Arch Chemicals*** 27 Financial Data Schedule*** 99.1 Arch Chemicals Information Statement dated January 21, 1999**
- -------- * To be filed by amendment. ** Filed herewith. *** Previously filed. EX-2 2 DISTRIBUTION AGREEMENT EXHIBIT 2 DISTRIBUTION AGREEMENT between OLIN CORPORATION, and ARCH CHEMICALS, INC. -------------------------- Dated as of [ ], 1999 -------------------------- DISTRIBUTION AGREEMENT TABLE OF CONTENTS Page ---- ARTICLE I Definitions ----------- SECTION 1.01. Definitions.......................... 1 ARTICLE II Certain Transactions at or Prior to the Distribution; ----------------------------------------------------- Certain Covenants ----------------- SECTION 2.01. Certain Transactions................. 13 SECTION 2.02. Financing............................ 16 SECTION 2.03. Operations in Ordinary Course........ 16 SECTION 2.04. Capital Structure.................... 16 SECTION 2.05. Resignations......................... 16 SECTION 2.06. Further Assurances................... 16 SECTION 2.07. No Representations or................ 17 Warranties SECTION 2.08. Elimination of Guarantees............ 17 SECTION 2.09. Intercompany Accounts................ 18 SECTION 2.10. Transfers Not Effected Prior to...... 18 Distribution Date; Transfers Deemed Effective as of Distribution Date SECTION 2.11. Ancillary Agreements................. 19 ARTICLE III The Distribution ---------------- SECTION 3.01. Distribution Record Date and Distribution Date.................... 19 SECTION 3.02. The Agent............................ 19 SECTION 3.03. The Distribution..................... 19 SECTION 3.04. Contract Provisions.................. 20 ARTICLE IV Access to Information --------------------- SECTION 4.01. Provision of Corporate Records....... 20 SECTION 4.02. Access to Information................ 20 Page ---- SECTION 4.03. Reimbursement; Records Retention............................ 21 SECTION 4.04. Witness Services..................... 21 SECTION 4.05. Confidentiality...................... 21 ARTICLE V Dispute Resolution ------------------ SECTION 5.01. Dispute Resolution................... 22 ARTICLE VI Insurance --------- SECTION 6.01. Coverage............................. 24 SECTION 6.02. Claims Based Upon Pre-Distribution Date Injury; Waiver.................. 24 SECTION 6.03. Administration....................... 26 SECTION 6.04. Insurance Proceeds................... 27 SECTION 6.05. Retrospectively Rated Policies....... 27 SECTION 6.06. Agreement for Waiver of Conflict and Shared Defense................... 27 SECTION 6.07. Cooperation.......................... 27 ARTICLE VII Indemnification --------------- SECTION 7.01. Indemnification...................... 28 SECTION 7.02. Insurance Matters.................... 28 SECTION 7.03. Procedures for Indemnification....... 29 SECTION 7.04. Indemnification Payments............. 31 SECTION 7.05. Other Adjustments.................... 31 SECTION 7.06. Consolidation, Merger, Transfer, or Lease............................. 32 SECTION 7.07. Survival............................. 32 ARTICLE VIII Miscellaneous ------------- SECTION 8.01. Conditions to Obligations............ 32 SECTION 8.02. Exhibits and Schedules; Interpretation....................... 34 SECTION 8.03. Entire Agreement..................... 34 ii Page ---- SECTION 8.04. Ancillary Agreements................. 34 SECTION 8.05. Counterparts......................... 34 SECTION 8.06. Survival of Agreements............... 35 SECTION 8.07. Expenses............................. 35 SECTION 8.08. Notices.............................. 35 SECTION 8.09. Waivers.............................. 35 SECTION 8.10. Amendments........................... 36 SECTION 8.11. Assignment........................... 36 SECTION 8.12. Successors and Assigns............... 36 SECTION 8.13. Termination.......................... 36 SECTION 8.14. Subsidiaries......................... 36 SECTION 8.15. Third Party Beneficiaries............ 36 SECTION 8.16. Attorney Fees........................ 36 SECTION 8.17. Title and Headings................... 37 SECTION 8.18. Exhibits and Schedules............... 37 SECTION 8.19. Specific Performance................. 37 SECTION 8.20. Governing Law........................ 37 SECTION 8.21. Consent to Jurisdiction.............. 37 SECTION 8.22. Severability......................... 38 EXHIBITS Exhibit A - Form of Arch Amended and Restated - Articles of Incorporation Exhibit B - Form of Arch By-laws Exhibit C - Form of Arch Rights Agreement SCHEDULES Schedule 1.01(a) - Real Estate Schedule 1.01(b) - Equity Interests Schedule 1.01(c) - Certain Additional Transferred Assets Schedule 1.01(d) - Retained Assets Schedule 1.01(e) - Retained Businesses Schedule 1.01(f) - Litigation Schedule 1.01(g) - Certain Contractual Liabilities Schedule 1.01(h) - Certain Additional Liabilities Schedule 1.01(i) - Certain Excluded Liabilities Schedule 1.01(j) - Arch Product Lines Schedule 2.08 - Guarantees Schedule 3.04 - Contract Provisions iii DISTRIBUTION AGREEMENT dated as of [ ], 1999, between OLIN CORPORATION, a Virginia corporation ("Olin"), and ARCH CHEMICALS, INC., a Virginia corporation ("Arch"). WHEREAS, the Board of Directors of Olin has deter mined to distribute to the holders of shares of Common Stock, par value $1 per share, of Olin (the "Olin Common Stock") all the outstanding shares of Common Stock, par value $1 per share, of Arch (the "Arch Common Shares"); WHEREAS, it is the intention of the parties that the Distribution (as defined below) will be a tax-free transaction pursuant to Sections 355 and 368(a)(1)(D) of the Code (as defined below), such that no gain or loss shall be recognized by the shareholders of Olin for federal income tax purposes as a result of the Distribution; and WHEREAS, it is desirable to allocate and assign responsibility for various matters affecting the activities of Arch and to set forth the principal corporate transactions required to effect such distribution and other agreements that will govern certain other matters following the Distribution. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the parties hereto hereby agree as follows: ARTICLE I Definitions ----------- SECTION 1.01. Definitions. As used in this Agreement, the following ------------ terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Action" shall mean any claim, action, order, suit, arbitration, inquiry, proceeding or investigation by or before any court, any governmental or other regulatory or administrative official, agency, body or commission or any arbitration tribunal, including any claims or contract disputes concerning any governmental contract. "Affiliate" shall mean, when used with respect to a specified person, another person that directly, or indi- 2 rectly through one or more intermediaries, controls or is controlled by or is under common control with the person specified. "Agent" shall mean ChaseMellon Shareholder Services, L.L.C. "Agreement" shall mean this Distribution Agreement. "Ancillary Agreements" shall mean all of the written agreements, instruments, assignments or other written arrangements (other than this Agreement) entered into in connection with the transactions contemplated hereby, including (i) the Tax Sharing Agreement; (ii) the Chlor-Alkali Supply Agreement; (iii) the Charleston Services Agreement; (iv) the Covenant Not to Compete Agreement; (v) the Intellectual Property Transfer and License Agreement; (vi) the Transition Services Agreement; (vii) the International Transition Services Agreements; (viii) the Trade Name License Agreement; (ix) the Employee Benefits Agreement; (x) the Information Technology Services Agreement; (xi) the Novation Agreements; (xii) the Lake Charles Operating Agreement; (xiii) the Charleston Operating Agreement; (xiv) the Hydrazine Operating Agreement; (xv) the McIntosh Services Agreement; (xvi) the Sublease; and (xvii) the International Transfer Agreements. "Arch Assets" shall mean, collectively, all the Assets of Olin and its Subsidiaries primarily related to the Arch Business, including: (i) all Assets included on the Arch Balance Sheet or the accounting records supporting the Arch Balance Sheet, and all Assets acquired between September 30, 1998 and the Distribution Date which would have been included on the Arch Balance Sheet had they been owned on September 30, 1998; (ii) all Assets primarily related to the Arch Business, which are owned, leased, licensed or held by Olin or Arch or any of their respective Affiliates on the Distribution Date; (iii) the real property (including the buildings, fixtures and improvements located thereon) listed on Schedule 1.01(a); (iv) all of the outstanding shares of all classes of capital stock of the Subsidiaries of Arch to the extent owned by Olin or any of its Affiliates; (v) the partnership, joint venture and other equity interests listed on Schedule 1.01(b); (vi) subject to Section 2.01(c), the Assigned Contracts; (vii) those books and records to be delivered to Arch and rights of access to other books and records as provided in Article IV of this Agreement; (viii) the rights of Arch under the Company Policies as provided in Article VI of this Agreement; (ix) subject to Section 6.02(d), all rights, benefits and 3 privileges under the Hunt Policies; (x) any pension Assets, pension funds or other Assets expressly contemplated to be transferred, licensed or otherwise made available to Arch pursuant to the Employee Benefits Agreement or any of the other Ancillary Agreements; (xi) the Intellectual Property that is to be transferred to Arch pursuant to the Intellectual Property Transfer and License Agreement, subject to the limitations set forth in such agreement; (xii) all of the Assets listed on Schedule 1.01(c); provided, however, that none of the -------- ------- Assets set forth on Schedule 1.01(d) shall constitute Arch Assets. "Arch Balance Sheet" shall mean the combined balance sheet of Arch as of September 30, 1998, as set forth in the Information Statement. "Arch Business" shall mean the specialty chemical businesses of Olin, which includes (i) the microelectronic chemicals business, (ii) the water chemicals business (which includes, among other things, Water Treatment) and (iii) the performance chemicals business, in each case, as conducted by Olin and its Subsidiaries as of the Distribution Date and as described more fully in the Information Statement; provided, however, that none of the businesses set forth -------- ------- on Schedule 1.01(e) shall constitute an Arch Business. "Arch Division Employee" shall mean any individual (x) who (i) becomes an active employee of Arch at or following the Distribution Date and (ii) at all times prior to the Distribution Date while employed by Olin was employed solely as a division employee in the Arch Business and never as an Olin Corporate Employee or (y) who (i) is not employed by Olin or Arch at or following the Distribution Date and (ii) at all times prior to the Distribution Date for the period of time that such individual was employed by Olin, was employed by Olin solely as a division employee in the Arch Business and never as an Olin Corporate Employee. "Arch Liabilities" shall mean the following Liabilities, in each case excluding the Excluded Liabilities: (i) all the Liabilities of Arch and its Subsidiaries under this Agreement and any of the Ancillary Agreements; (ii) all the Liabilities (other than Liabilities in respect of (w) Environmental Matters, (x) Litigation Matters, (y) Disability Matters and (z) Employment Matters) of the parties hereto or their respective Subsidiaries arising after the Distribution Date out of or in connection with or otherwise relating to the activities, business, operations, status, management or conduct before, on or after the Distribution Date of the Arch Business or the Arch Assets; (iii) all the Liabilities set forth on the Arch 4 Balance Sheet (or reflected in the notes thereto), and Liabilities incurred by Olin or Arch or any of their Affiliates between September 30, 1998 and the Distribution Date as and to the extent they would have been included on the Arch Balance Sheet had they been incurred or arisen on or prior to September 30, 1998; (iv) all Liabilities under the Credit Agreement; (v) all Liabilities relating to the Litigation Matters set forth on Schedule 1.01(f); (vi) the Liabilities set forth on Schedule 1.01(g); (vii) the Liabilities set forth on Schedule 1.01(h); (viii) the Liabilities specifically allocated to Arch pursuant to the Employee Benefits Agreement; (ix) the Liabilities in respect of Actions relating to Disability Matters asserted after the Distribution Date by any former Olin employees whose long-term disability obligations are assumed by Arch under the Employee Benefits Agreement; and (x) the Liabilities in respect of Actions relating to Employment Matters asserted after the Distribution Date involving claims made by an Arch Division Employee regarding an action or omission on the part of another Arch Division Employee. "Arch Off-Site Disposal Matter" shall mean the disposal, arrangement for disposal or transportation by Olin, its Subsidiaries or toll manufacturers for any of them, prior to the Distribution Date, of Hazardous Materials of the Arch Business at or to a landfill, dump, surface impoundment or other surface location (excluding any location on or at the facilities or properties of Olin or Arch) that, as between Olin and Arch, is being used exclusively by Arch, its Subsidiaries or toll manufacturers (acting in connection with the Arch Business) for any of them at or after the Distribution Date and had been used exclusively in connection with the Arch Business at all times prior to the Distribution Date. "Arch Product Lines" shall have the meaning assigned to such term on Schedule 1.01(j). "Arch Properties" shall mean the land, buildings and improvements either owned or leased by Arch or any of its Subsidiaries (including property being used by a person who is a toll manufacturer for Arch or any of its Subsidiaries), in each case immediately following the Distribution Date or which is transferred to Arch or any of its Subsidiaries in connection with the Distribution, other than the Arch Shared Sites and Arch Sites. "Arch Shared Sites" shall mean the property owned by Arch immediately following the Distribution Date located at (i) Lake Charles, Louisiana, (ii) Charleston, Tennessee 5 and (iii) McIntosh, Alabama, in each case, operated in connection with the Arch Business. "Arch Sites" shall mean (i) the Doe Run plant in Brandenburg, Kentucky, (ii) the B.V. Swords plant in Dublin, Ireland, (iii) the Aqua Chlor HTH plant in Chloorkop, South Africa and (iv) the Biocides plant (including the quarry) in Rochester, New York. "Articles" shall mean the Amended and Restated Articles of Incorporation of Arch, substantially in the form attached hereto as Exhibit A. "Asset" shall mean any and all assets and properties, tangible or intangible, real or personal, including the following: (i) cash, notes and accounts and notes receivable (whether current or non-current); (ii) certificates of deposit, banker's acceptances, stock, debentures, evidences of indebtedness, certificates of interest or participation in profit-sharing agreements, collateral-trust certificates, preorganization certificates or subscriptions, transferable shares, investment contracts, voting-trust certificates, fractional undivided interests in oil, gas or other mineral rights, puts, calls, straddles, options and other securities of any kind; (iii) intangible property rights, inventions, discoveries, know-how, United States and foreign patents and patent applications, trade secrets, confidential information, registered and unregistered trademarks, service marks, service names, trade styles and trade names and associated goodwill, statutory, common law and registered copyrights, applications for any of the foregoing; rights to use the foregoing and other rights in, to and under the foregoing; (iv) rights under leases, contracts, licenses, permits, distribution arrange ments, sales and purchase agreements, other agreements and business arrangements; (v) real estate and buildings and other improvements thereon; (vi) leasehold improvements, fixtures, trade fixtures, machinery, equipment (including transportation and office equipment), tools, dies and furniture; (vii) office supplies, production supplies, spare parts, other miscellaneous supplies and other tangible property of any kind; (viii) computer equipment and soft ware; (ix) raw materials, work-in-process, finished goods, consigned goods and other inventories; (x) prepayments or prepaid expenses; (xi) claims, causes of action, choses in action, rights under express or implied warranties, rights of recovery and rights of setoff of any kind; (xii) the rights to receive mail, payments on accounts receivable and other communications; (xiii) lists of customers, records pertaining to customers and accounts, personnel records, lists and records pertaining to customers, suppliers and 6 agents, and books, ledgers, files and business records of every kind; (xiv) advertising materials and other printed or written materials; (xv) goodwill as a going concern and other intangible properties; (xvi) employee contracts, including any rights thereunder to restrict an employee from competing in certain respects; and (xvii) licenses and authorizations issued by any governmental authority. "Assigned Contract" shall mean (x) any Contract that in Olin's sole judgment relates exclusively to the Arch Business ("Exclusive Assigned Contracts") and (y) with respect to any Contract that relates, but does not in Olin's sole judgment relate exclusively, to the Arch Business ("Partial Assigned Contracts"), the portion, if any, of such Partial Assigned Contract that, in Olin's sole judgment, relates to the Arch Business (the "Arch Portion"). "By-laws" shall mean the By-laws of Arch, substantially in the form attached hereto as Exhibit B. "Charleston Services Agreement" shall mean the Charleston Services Agreement dated as of [ ], 1999, between Olin and Arch. "Charleston Operating Agreement" shall mean the Operating Agreement - Charleston Steam Generating Facilities dated as of [ ], 1999, between Olin and Arch. "Chlor-Alkali Supply Agreement" shall mean the Chlor-Alkali Supply Agreement dated as of [ ], 1999, between Olin and Arch. "Claims Administration" shall mean (i) the processing of claims made under Company Policies and Hunt Policies, including the reporting of claims and occurrences to the appropriate insurance carriers and the collection of the proceeds of such policies, (ii) in the case of the Arch Business, the reporting to Olin of any losses or claims which may cause the per-occurrence deductible or self-insured retention or limits of any Company Policy to be exceeded and (iii) in the case of the Olin Business, the reporting to Arch of any loss or claim asserted by Olin under the Hunt Policies. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the Treasury regulations promulgated thereunder, including any successor legislation. "Commission" shall mean the Securities and Exchange Commission. 7 "Company Policies" shall mean all Policies, current or past, under which Olin or any Subsidiary, Affiliate or predecessor of Olin is a named insured; provided, however, that Company Policies shall not include the Hunt -------- ------- Policies. "Contract" shall mean a contract, agreement, lease or commitment of Olin or any of its Subsidiaries, in each case, entered into prior to the Distribution Date. "Covenant Not to Compete Agreement" shall mean the Covenant Not to Compete Agreement dated as of [ ], 1999, between Olin and Arch. "Credit Agreement" shall mean, collectively, (i) the 364-Day Credit Agreement dated as of [ ], 1999, among Arch, Olin, the Lenders party thereto, Bank of America, National Trust and Savings Association, as Syndication Agent, Wachovia Bank of Georgia, N.A., as Documentation Agent, The Chase Manhattan Bank, as Administrative Agent and Chase Securities Inc., as Arranger and (ii) the Five-Year Credit Agreement dated as of [ ], 1999 among Arch, Olin, the Lenders party thereto, Bank of America, National Trust and Savings Association, as Syndication Agent, Wachovia Bank of Georgia, N.A., as Documentation Agent, The Chase Manhattan Bank, as Administrative Agent and Chase Securities Inc., as Arranger. "Disability Matters" shall mean matters relating to the eligibility, qualification or payment of long-term disability benefits by Olin or its Subsidiaries. "Distribution" shall have the meaning specified in Section 3.03. "Distribution Date" shall mean February [ ], 1999, or such other date as may hereafter be determined by the Olin Board as the date on which the Distribution shall be deemed effective. "Distribution Record Date" shall mean January [ ], 1999, or such other date as may hereafter be determined by the Olin Board as the record date for the Distribution. "Employee Benefits Agreement" shall mean the Employee Benefits Allocation Agreement dated as of [ ], 1999, between Olin and Arch. "Employment Matters" shall mean any and all claims relating to employment discrimination matters including but not limited to claims of wrongful discharge or claims of 8 discriminatory treatment based upon any one or combination of the factors of sex, race, religion, sexual orientation, handicap or national origin, arising under federal, state or local law, whether such claims arise due to common law (whether arising in tort or contract) or by constitution, statute or ordinance. "Environmental Laws" shall mean any and all applicable treaties, laws, regulations, enforceable requirements, binding determinations, orders, decrees, judgments, injunctions, permits, approvals, authorizations, licenses, variances, permissions, notices or binding agreements issued, promulgated or entered into at any time by any Governmental Entity, relating to the environment, preservation or reclamation of, or damage to, natural resources, or to the management, release, threatened release of, or exposure to, Hazardous Materials. "Environmental Matters" shall mean (i) in connection with any Environmental Law, any noncompliant condition existing at or prior to the Distribution Date of records, permits, filings, notifications, facilities or equipment, (ii) in connection with any Environmental Law, any condition of, or substances, facilities or equipment in or under the soil, surface water or groundwater existing at or prior to the Distribution Date which has required, is requiring or may in the future require investigation, mitigation, remediation, monitoring or cleanup or (iii) Third Party Exposure Claim. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Liabilities" shall mean (i) any Liabilities related to Assets of Olin and its Subsidiaries that do not constitute Arch Assets (except as otherwise expressly set forth herein), (ii) all Liabilities arising out of, in connection with, or relating to (A) the Olin Sites or the Olin Retained Shared Site Environmental Liabilities, (B) the management or conduct before, on or after the Distribution Date of the Olin Business or (C) the historical and no longer active businesses of Olin and its Subsidiaries and (iii) the Liabilities set forth on Schedule 1.01(i). "Form 10" shall mean the registration statement on Form 10 filed by Arch with the Commission to effect the registration of the Arch Common Shares under the Exchange Act, as such registration statement may be amended from time to time. 9 "Hazardous Materials" shall mean all explosive or regulated radioactive materials, hazardous or toxic materials, substances, wastes or chemicals, petroleum (including crude oil or any fraction thereof), asbestos or asbestos containing materials, and all other materials or chemicals regulated pursuant to any Environmental Law. "Hunt" shall mean Philip A. Hunt Chemical Corporation. "Hunt Policies" shall mean all Policies issued to Hunt. "Hydrazine Operating Agreement" shall mean the Operating Agreement - Hydrazine Blending Facility dated as of [ ], 1999, between Olin and Arch. "Indemnifiable Losses" shall have the meaning specified in Section 7.01. "Information Statement" shall mean the Information Statement dated [ ], 1999, sent to the holders of shares of Olin Common Stock in connection with the Distribution, including any amendment or supplement thereto. "Information Technology Services Agreement" shall mean the Information Technology Services Agreement dated as of [ ], 1999, between Olin and Arch. "Insured Claims" shall mean those Liabilities that, individually or in the aggregate, are covered within the terms and conditions of any Company Policy or Hunt Policy, whether or not subject to deductibles, uncollectability or retrospectively-rated premium adjustments, but only to the extent that such Liabilities are within applicable Company Policy or Hunt Policy limits, including aggregates. "Intellectual Property" shall mean (i) patents (including all reissues, divisions, continuations and extensions thereof), patent licenses and patent applications, (ii) trademarks, trademark rights, trademark licenses, trademark registrations, servicemarks, trademark registration applications (filed or unfiled) and trade names and (iii) copyrights and copyright licenses. "Intellectual Property Transfer and License Agreement" shall mean the Intellectual Property Transfer and License Agreement dated as of [ ], 1999, between Olin and Arch. 10 "International Transfer Agreements" shall mean those certain International Transfer Agreements each dated as of [ ], 1999, between Olin and Arch, and relating to Brazil, Canada, South Korea and Singapore. "International Transition Services Agreements" shall mean the Transition Services Agreements-International dated as of [ ], 1999, between Olin or its Subsidiaries on the one hand, and Arch or its Subsidiaries on the other hand. "Lake Charles Operating Agreement" shall mean the Operating Agreement - - Lake Charles Caustic Terminal dated as of [ ], 1999, between Olin and Arch. "Liabilities" shall mean any and all debts, lia bilities and obligations, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, including those debts, liabilities and obligations arising under any law, rule, regulation, Action, threatened Action, order or consent decree of any court, any governmental or other regulatory or administrative agency or commission or any award of any arbitration tribunal, and those arising under any contract, guarantee, commitment or undertaking. "Litigation Matters" shall mean actual, threatened or future litigation, investigations, claims or other legal matters that may have been or may be asserted against or otherwise adversely affect, Olin and/or Arch or the respective Subsidiaries of either of them. "McIntosh Services Agreement" shall mean the Services Agreement for A50 Plant at McIntosh dated as of [ ], 1999, between Olin and Arch. "Novation Agreements" shall mean the Novation Agreements dated as of [ ], 1999, among Olin, Arch and the United States. "NYSE" shall mean The New York Stock Exchange, Inc. "Olin Board" shall mean the Board of Directors of Olin. "Olin Business" shall mean the businesses of any division, Subsidiary or investment of Olin (other than the Arch Business) managed or operated prior to the Distribution Date by any such business entity. 11 "Olin Corporate Employee" shall mean an individual who was at any time, a corporate employee or on the "corporate" payroll of Olin. "Olin Liabilities" shall mean collectively, (i) all the Liabilities of Olin and its Subsidiaries (excluding Arch and its Subsidiaries) under this Agreement and any of the Ancillary Agreements, (ii) Excluded Liabilities, and (iii) all the Liabilities (whenever arising whether prior to, at or following the Distribution Date) of the parties hereto or their respective Subsidiaries that do not constitute Arch Liabilities. "Olin Properties" shall mean all land, buildings and improvements owned or leased by Olin or any of its Subsidiaries (including property being used by a person who is a toll manufacturer for Olin or any of its Subsidiaries) at any time other than the Arch Properties, Arch Shared Sites or Arch Sites. "Olin Retained Shared Site Environmental Liabilities" shall mean all Liabilities in respect of those Environmental Matters that (i) are known to Olin or any of its Subsidiaries at or prior to the Distribution Date and relate to any Arch Shared Site or (ii) in the case of the Arch Shared Site located in Lake Charles, Louisiana relate to the plant and other assets sold to Bio-Lab, Inc. "Olin Site" shall mean any site or location that is known to Olin or any of its Subsidiaries at or prior to the Distribution Date to be or have been the subject of any Environmental Matter other than the Arch Sites and Arch Properties. "person" shall mean any natural person, corpora tion, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. "Policies" shall mean insurance policies and insurance contracts of any kind (other than life and benefits policies or contracts), including primary, excess and umbrella policies, commercial general liability policies, fiduciary liability, environmental impairment, director and officer, health, automobile, aircraft, property and casualty, workers' compensation and employee dishonesty insurance policies, bonds and self-insurance and captive insurance company arrangements, together with the rights, benefits and privileges thereunder. 12 "Rights Plan" shall mean the Rights Agreement dated as of [ ], 1999, between Arch and ChaseMellon Shareholder Services, L.L.C., as rights agent, substantially in the form attached hereto as Exhibit C. "Securities Act" shall mean the Securities Act of 1933, as amended. "Sublease" shall mean the Sublease dated as of [ ], 1999, between Olin and Arch relating to the office space at 501 Merritt 7, Norwalk, Connecticut. "Subsidiary" shall mean any corporation, partner ship or other entity of which another entity (i) owns, directly or indirectly, ownership interests sufficient to elect a majority of the Board of Directors (or persons per forming similar functions) (irrespective of whether at the time any other class or classes of ownership interests of such corporation, partnership or other entity shall or might have such voting power upon the occurrence of any contingency) or (ii) is a general partner or an entity performing similar functions (e.g., a trustee). For all purposes hereof, the term "Subsidiary", ---- when used to refer to Subsidiaries of Olin, shall be deemed to include Arch and its Subsidiaries, unless the context otherwise requires. "Tax" shall mean all Federal, state, local and foreign taxes and assessments, including all interest, penalties and additions imposed with respect to such amounts. "Tax Sharing Agreement" shall mean the Tax Sharing Agreement dated as of [ ], 1999, between Olin and Arch. "Third Party Exposure Claim" shall mean a written claim by any third party alleging personal injury or property damage from, exposure to, or the release, discharge or migration of, Hazardous Materials. "Trade Name License Agreement" shall mean the Trade Name and Trademark License Agreement dated as of [ ], 1999, between Olin and Arch. "Transition Services Agreement" shall mean the Services Agreement dated as of [ ], 1999, between Olin and Arch. "Water Treatment" shall have the meaning assigned to such term in the Covenant Not to Compete Agreement. 13 ARTICLE II Certain Transactions at or Prior to the Distribution; ----------------------------------------------------- Certain Covenants ----------------- SECTION 2.01. Certain Transactions. (a) Contribution and Transfer of --------------------- ---------------------------- Assets. At or prior to the Distribution Date: - ------- (i) Olin shall contribute to Arch the business entities that are to comprise the Arch Business (to the extent they are not owned by Arch or any of its Subsidiaries). (ii) Olin shall, on behalf of itself and its Subsidiaries, transfer to Arch effective as of the Distribution Date all of Olin's and its Subsidiaries' right, title and interest in and to the Arch Assets. (b) Assumption and Satisfaction of Liabilities. Except as otherwise ------------------------------------------- specifically set forth in any Ancillary Agreement, from and after the Distribution Date, (i) Olin shall, and shall cause its Subsidiaries to, assume, pay, perform and discharge all Olin Liabilities, and (ii) Arch shall, and shall cause its Subsidiaries to, assume, pay, perform and discharge all Arch Liabilities. (c) Transfer of Agreements; Consent. (i) Olin hereby agrees that at -------------------------------- or prior to the Distribution Date or as soon as reasonably practicable thereafter, subject to the limitations set forth in this Section 2.01(c) and the terms of the Ancillary Agreements, it will, and it will cause its Subsidiaries (other than Arch or any of its Subsidiaries) to, assign, transfer and convey to Arch (or to one of Arch's designated Subsidiaries) all of Olin's and each such Sub sidiary's respective right, title and interest in and to all Exclusive Assigned Contracts. (ii) Subject to the provisions of this Section 2.01(c) and the terms of the Ancillary Agreements, with respect to Partial Assigned Contracts, on or prior to the Distribution Date or as soon as reasonably practicable thereafter (A) Olin shall use reasonable efforts to cause each such Partial Assigned Contract to be divided into separate contracts for each of the Olin Business and the Arch Business or (B) if such a division is not possible, Olin shall cause the Arch Portion of such Partial Assigned Contract to be assigned to Arch, or otherwise to cause the same economic and business terms to govern with respect to such Arch Portion (by subcontract, sublicense or otherwise). 14 (iii) Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any Assigned Contract, in whole or in part, or any rights thereunder if the agreement to assign or attempt to assign, without the consent of a third party, would constitute a breach thereof or in any way adversely affect the rights of the assignee (the "Assignee") thereof. Until such consent is obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of any party hereto so that the Assignee would not, in fact, receive all such rights, the parties will cooperate with each other in any alternative arrangement designed to provide for the Assignee the benefits of, and to permit the Assignee to assume liabili ties under, any such Assigned Contract. The parties hereto shall use commercially reasonable efforts to obtain required consents to assignment of Assigned Contracts hereunder. (d) Stock Issuance to Olin. At or prior to the Distribution Date, ----------------------- Arch shall issue to Olin a number of newly issued, fully paid and non-assessable Arch Common Shares, in exchange for the contribution of the Arch Business and the Arch Assets, required to effect the Distribution. (e) Charter; By-Laws; Rights Plan. At or prior to the Distribution ------------------------------ Date, all necessary action shall have been taken to provide for the adoption by Arch of the Articles, the By-laws and the Rights Plan. (f) Directors. At or prior to the Distribution Date, (i) Olin, as ---------- the sole shareholder of Arch, shall have taken all necessary action to elect, or cause to be elected, to the Board of Directors of Arch the individuals identified in the Information Statement as directors of Arch, such elections to be effective on or prior to [ ], 1999 and (ii) once elected, the Board of Directors of Arch shall select such other individuals to be designated as directors of Arch as the Board of Directors of Arch shall decide. (g) Registration and Listing. Prior to the Distribution Date: ------------------------ (i) Olin and Arch shall prepare, and Arch shall file with the Commission, the Form 10, which includes or incorporates by reference the Information Statement. Olin and Arch shall use reasonable efforts to cause the Form 10 to become effective under the Exchange Act as promptly as reasonably practicable. 15 (ii) Olin and Arch shall prepare, and Arch shall file and seek to make effective, an application to permit listing of the Arch Common Shares on the NYSE, subject to official notice of issuance. (iii) Olin and Arch shall prepare, and Olin shall mail to the holders of shares of Olin Common Stock on the Distribution Record Date, the Information Statement, which shall set forth appropriate disclosure concerning Arch, the Distribution and other matters. (iv) Olin and Arch shall use reasonable efforts to take all such action as may be necessary or appropriate under the state securities or blue sky laws in connection with the transactions contemplated by this Agreement and the Ancillary Agreements. (v) Olin and Arch shall cooperate in preparing, filing with the Commission and causing to become effective any registration statements or amendments thereof which are necessary or appropriate in order to effect the transactions contemplated hereby or to reflect the establishment of, or amendments to, any employee benefit and other plans contemplated by the Employee Benefits Agreement requiring registration under the Securities Act. (h) Certain Licenses and Permits. At or prior to the Distribution ----------------------------- Date or as soon as reasonably practicable thereafter, all transferrable licenses, permits and authorizations issued by governmental or regulatory entities which relate to the Arch Business but which are held in the name of Olin or any of its Subsidiaries (other than Arch or any of its Subsidiaries), or any of their respective employees, officers, directors, stockholders, agents, or otherwise, on behalf of Arch (or its Subsidiaries) shall be duly and validly transferred by Olin to Arch (or its Subsidiaries). (i) Lease Amendments. At or prior to the Distribution Date, ----------------- amendments shall be executed to each of the leases to which Olin is a party and which provide for the lease of real or personal property representing Arch Assets or relating to the Arch Business which amendments will provide for the substitution of Arch for Olin as lessee or lessor, as the case may be, and to the extent agreeable to the other party to the lease excuse Olin from any further Liabilities or responsibilities with respect thereto. (j) Other Transactions. At or prior to the Distribution Date, Olin ------------------- and Arch shall have consummated 16 those other transactions in connection with the Distribution that are contemplated by the Information Statement and not specifically referred to in subparagraphs (a)-(i) above. SECTION 2.02. Financing. Each of the parties hereto shall take all ---------- actions necessary to arrange for the Credit Agreement and to cause Arch to assume Olin's rights and obligations under the Credit Agreement immediately prior to the Distribution Date, provided that Olin shall have no obligation to guarantee or otherwise provide credit support or enhancement for the obligations of Arch under the Credit Agreement. SECTION 2.03. Operations in Ordinary Course. Each of Olin and Arch ------------------------------ agrees that, except as otherwise provided in any Ancillary Agreement or this Agreement, during the period from the date of this Agreement through the Distribution Date, it will, and will cause their respective Subsidiaries during such period to, conduct its business in a manner substantially consistent with current and past operating practices and in the ordinary course, including with respect to the payment and administration of accounts payable and the administration of accounts receivable, the purchase of capital Assets and equipment and the management of inventories. SECTION 2.04. Capital Structure. Each of Olin and Arch agrees to use ------------------ commercially reasonable efforts to achieve both an allocation of consolidated indebtedness of Olin and a capital structure of Arch which substantially reflects the capital structure after the Distribution of Arch set forth in the Information Statement under the heading "Capitalization". SECTION 2.05. Resignations. Olin shall cause all its directors, ------------- officers and employees to resign, effective as of [ ], 1999, from all positions as officers of Arch or as officers or directors of any Subsidiary of Arch in which they serve. Olin shall also cause the directors of Olin referred to in the Information Statement to resign as directors of Olin, effective as of [ ], 1999. Arch shall cause all its employees to resign, effective as of [ ], 1999, from all positions as officers of Olin or as officers or directors of any Subsidiary of Olin (other than Arch or its Subsidiaries) in which they serve. SECTION 2.06. Further Assurances. In case at any time after the ------------------- Distribution Date any further action is reasonably necessary or desirable to carry out the purposes of this Agreement and the Ancillary Agreements, the officers of each party to this Agreement shall take all such 17 necessary action. Without limiting the foregoing, Olin and Arch shall use commercially reasonable efforts to obtain all consents and approvals, to enter into all amendatory agreements and to make all filings and applications that may be required for the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements, including all applicable governmental and regulatory filings and novations. SECTION 2.07. No Representations or Warranties. Each of the parties --------------------------------- hereto understands and agrees that, except as otherwise expressly provided herein or in any Ancillary Agreement, no party hereto is, in this Agreement, in any Ancillary Agreement or in any other agreement or document contemplated by this Agreement or otherwise, making any representation or warranty whatsoever, including as to title, value or legal sufficiency. It is also agreed and understood that all Assets either transferred to or retained by the parties, as the case may be, shall be "as is, where is" and that (subject to Section 2.06) the party to which such Assets are to be transferred hereunder shall bear the economic and legal risk that any conveyances of such Assets shall prove to be insufficient or that such party's or any of its Subsidiaries' title to any such Assets shall be other than good and marketable and free from encumbrances. Similarly, each party hereto understands and agrees that no party hereto is, in this Agreement, in any Ancillary Agreement or in any other agreement or document contemplated by this Agreement or otherwise, representing or warranting in any way that the obtaining of any consents or approvals, the execution and delivery of any amendatory agreements and the making of any filings or applications contemplated by this Agreement will satisfy the provisions of any or all applicable agreements or the requirements of any or all applicable laws or judgments, it being agreed and understood that the party to which any Assets are transferred shall bear the economic and legal risk that any necessary consents or approvals are not obtained or that any requirements of laws or judgments are not complied with. SECTION 2.08. Elimination of Guarantees. Except as otherwise -------------------------- specified in any Ancillary Agreement, Olin and Arch shall use their commercially reasonable efforts to have, on or prior to the Distribution Date, or as soon as practicable thereafter, Olin and each of its Subsidiaries (other than Arch or its Subsidiaries) removed as guarantor of or obligor for any Arch Liability or Liabilities, including in respect of those guarantees set forth on Schedule 2.08. To the extent that Olin or any of its Subsidiaries (other than Arch or its Subsidiaries) cannot be removed as guarantor of or obligor for any such Arch 18 Liability or Liabilities, Arch agrees that, notwithstanding any contrary provision contained in any Novation Agreement referred to in Schedule 2.08, until such Arch Liability or Liabilities shall have been discharged in full, Arch will take no action, and will not permit any of its Subsidiaries to take any action, which will have the effect of increasing the contingent liability or exposure of Olin or any of its Subsidiaries (other than Arch or its Subsidiaries) with respect to such Arch Liability or Liabilities without Olin's prior written consent; provided, however, that with respect to any guarantee arising in connection with any Novation Agreement referred to in Schedule 2.08, Arch may modify (but not extend) the U.S. Government contracts relating to such Novation Agreements without Olin's prior written consent provided such modification is made in good faith and is commercially reasonable and does not unreasonably increase Olin's contingent liability or risk with respect thereto under such Novation Agreement taking into account the facts and circumstances at the time of the modification. SECTION 2.09 Intercompany Accounts. All intercompany receivables, --------------------- payables and loans existing immediately prior to the Distribution between Olin and its Subsidiaries (other than Arch or its Subsidiaries), on the one hand, and Arch and its Subsidiaries, on the other hand, shall be deemed canceled, settled and discharged immediately prior to the Distribution. SECTION 2.10. Transfers Not Effected Prior to Distribution Date; -------------------------------------------------- Transfers Deemed Effective as of Distribution Date. To the extent that any - --------------------------------------------------- transfers contemplated by this Article II shall not have been consummated at or prior to the Distribution Date, the parties shall cooperate to effect such transfers as promptly following the Distribution Date as shall be practicable. Nothing herein shall be deemed to require the transfer of any Assets or the assumption of any Liabilities which by their terms or operation of law cannot be transferred; provided, however, that the parties hereto and their respective -------- ------- Subsidiaries shall cooperate to seek to obtain any necessary consents or approvals for the transfer of all Assets and Liabilities contemplated to be transferred pursuant to this Article II. In the event that any such transfer of Assets or Liabilities has not been consummated, from and after the Distribution Date the party retaining such Asset or Liability shall hold such Asset in trust for the use and benefit of the party entitled thereto (at the expense of the party entitled thereto) or retain such Liability for the account of the party by whom such Liability is to be assumed pursuant hereto, as the case may be, and take such other action as may be reasonably 19 requested by the party to whom such Asset is to be trans ferred, or by whom such Liability is to be assumed, as the case may be, in order to place such party, insofar as is reasonably possible, in the same position as would have existed had such Asset or Liability been transferred as contemplated hereby. As and when any such Asset or Liability becomes transferable, such transfer shall be effected forthwith. The parties agree that, as of the Distribution Date, each party hereto shall be deemed to have acquired complete and sole beneficial ownership over all of the Assets, together with all rights, powers and privileges incident thereto, and shall be deemed to have assumed in accordance with the terms of this Agreement all of the Liabilities, and all duties, obligations and responsibili ties incident thereto, which such party is entitled to acquire or required to assume pursuant to the terms of this Agreement. SECTION 2.11. Ancillary Agreements. At or prior to the Distribution --------------------- Date, each of Olin and Arch shall enter into, and/or (where applicable) shall cause their respective Subsidiaries to enter into, the Ancillary Agreements and any other agreements in respect of the Distribution reasonably necessary or appropriate in connection with the transactions contemplated hereby and thereby. ARTICLE III The Distribution ---------------- SECTION 3.01. Distribution Record Date and Distribution Date. ----------------------------------------------- Subject to the satisfaction of the conditions set forth in Section 7.01(a), the Olin Board shall, in its sole discretion, establish the Distribution Record Date and the Distribution Date and any appropriate procedures in connection with the Distribution. SECTION 3.02. The Agent. Prior to the Distribution Date, Olin shall ---------- enter into an agreement with the Agent providing for, among other things, the Distribution in accordance with this Article III. SECTION 3.03. The Distribution. On the Distribution Date, Olin shall ----------------- deliver to the Agent, for the benefit of holders of record of shares of Olin Common Stock, one or more stock certificates representing all of the outstanding Arch Common Shares issued to Olin by Arch pursuant to Section 2.01(d), and shall instruct the Agent to distribute through direct registration (i.e., book-entry ---- transfer), on or as soon as practicable following the 20 Distribution Date, such Arch Common Shares to holders of record of shares of Olin Common Stock on the Distribution Record Date on the basis of one Arch Common Share for every two shares of Olin Common Stock (the "Distribution"). The Distribution shall be effective on the Distribution Date. Olin and Arch shall provide the Agent with all information and documents necessary to effect the direct registration of Arch Common Shares. SECTION 3.04. Contract Provisions. Following the Distribution Date, -------------------- Arch agrees to be bound by certain provisions of the Contracts set forth in Schedule 3.04 to the extent such provisions are applicable to Arch. ARTICLE IV Access to Information --------------------- SECTION 4.01. Provision of Corporate Records. (a) After the ------------------------------- Distribution Date, upon the prior written request by Arch for specific and identified agreements, documents, books, records or files, including computer files, microfiche, tape recordings and photographs (collectively, "Records"), relating to or affecting Arch, Olin shall arrange, as soon as reasonably practicable following the receipt of such request, for the provision of appropriate copies of such Records (or the originals thereof if the party making the request has a reasonable need for such originals) in the possession of any member of Olin or any of its Subsidiaries, but only to the extent such items are not already in the possession of the requesting party. (b) After the Distribution Date, upon the prior written request by Olin for specific and identified Records relating to or affecting Olin, Arch shall arrange, as soon as reasonably practicable following the receipt of such request, for the provision of appropriate copies of such Records (or the originals thereof if the party making the request has a reasonable need for such originals) in the possession of any member of Arch or any of its Subsidiaries, but only to the extent such items are not already in the possession of the requesting party. SECTION 4.02. Access to Information. From and after the Distribution ---------------------- Date, Olin and Arch shall afford to the other and its authorized accountants, counsel and other designated representatives (including governmental representatives and auditors in connection with governmental claims or audits) reasonable access during normal business hours, subject to appropriate restrictions for classified, 21 privileged or confidential information, to the personnel, properties, books and records of such party and its Subsidiaries insofar as such access is reasonably required by the other party. SECTION 4.03. Reimbursement; Records Retention. (a) Except to the --------------------------------- extent otherwise contemplated by any Ancillary Agreement, a party providing Records, access to information or witness services, as the case may be, to the other party under this Article IV shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments for such out-of- pocket amounts, relating to supplies, disbursements and other out-of-pocket expenses as may be reasonably incurred in providing such Records, access to information or witness services, as the case may be. (b) The parties hereto shall comply with such document retention policies as shall be established and agreed to in writing by their respective authorized officers on or prior to the Distribution Date in respect of Records and related matters. SECTION 4.04. Witness Services. At all times from and after the ----------------- Distribution Date, each of Olin and Arch shall use commercially reasonable efforts to make available to each other, upon written request, its and its Subsidiaries' officers, directors, employees and agents as witnesses to the extent that (i) such persons may reasonably be required in connection with the prosecution or defense of any Action in which the requesting party may from time to time be involved and (ii) there is no conflict in the Action between the requesting party and itself. The employing party agrees that such witness shall be made available to the requesting party upon reasonable notice to the same extent that such employing party would have made such witness available if the Distribution had not occurred. SECTION 4.05. Confidentiality. Each of Olin and its Subsidiaries and ---------------- Arch and its Subsidiaries shall not use or permit the use of (without the prior written consent of the other) and shall hold, and shall cause its consultants and advisors to hold, in strict confidence, all information concerning the other parties in its possession, its custody or under its control (except to the extent that (A) such information has been in the public domain or becomes part of the public domain through no fault of such party, (B) such information has been later lawfully acquired from other sources by such party without an obligation of confidence, (C) this Agreement or any other Ancillary Agreement or any other agreement entered into pursuant hereto permits the use 22 or disclosure of such information, (D) such information is requested by the Commission (i) to be provided supplementally to the Commission or (ii) to be provided in any document filed with the Commission, provided, that in the case -------- of this clause (ii), the party providing such information to the Commission shall first consult with the other party prior to, but shall not be prohibited from making, such disclosure or (E) such information is independently developed by such party without reference to such information) to the extent such information (x) relates to the period up to the Distribution Date, (y) relates to any Ancillary Agreement or (z) is obtained in the course of performing services for the other party pursuant to any Ancillary Agreement, and each party shall not (without the prior written consent of the other) otherwise release or disclose such information to any other person, except such party's auditors and attorneys, unless compelled to disclose such information by judicial or administrative process or unless such disclosure is required by law and such party has used commercially reasonable efforts to consult with the other affected party or parties prior to such disclosure. To the extent that a party hereto is compelled by judicial or administrative process to disclose such information under circumstances in which any evidentiary privilege would be available, such party agrees to assert such privilege in good faith prior to making such disclosure. Each party hereto agrees to consult with the other party in connection with any such judicial or administrative process, including in determining whether any privilege is available, and further agrees to allow such party and its counsel to participate in any hearing or other proceeding (including any appeal of an initial order to disclose) in respect of such disclosure and assertion of privilege. Each of Olin and Arch intends that the transactions contemplated hereby and by the Ancillary Agreements and any transfer of information in connection therewith shall not operate as a waiver of any potentially applicable privilege. ARTICLE V Dispute Resolution ------------------ SECTION 5.01. Dispute Resolution. (a) In the event of a ------------------- controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement, including any claim based on contract, tort, statute or constitution (collectively, "Agreement Disputes"), the General Counsels (or their designees) of the 23 relevant parties shall negotiate, commencing within 30 days of the occurrence of such Agreement Dispute, in good faith for a reasonable period of time to settle such Agreement Dispute. (b) If after such reasonable period such General Counsels (or their designees) are unable to settle such Agreement Dispute (and in any event after 60 days have elapsed from the time the relevant parties began such negotiations), such Agreement Dispute shall be determined, at the request of any relevant party, by arbitration conducted in New York City, before and in accordance with the then-existing Rules for Commercial Arbitration of the American Arbitration Association (the "Rules"), and any judgment or award rendered by the arbitrator shall be final, binding and nonappealable (except upon grounds specified in 9 U.S.C. (S)10(a) as in effect on the date hereof), and judg ment may be entered by any state or Federal court having jurisdiction thereof in accordance with Section 8.21 hereof. Unless the arbitrator otherwise determines, the pre-trial discovery of the then-existing Federal Rules of Civil Procedure and the then-existing Rules 46 and 47 of the Civil Rules for the United States District Court for the Southern District of New York shall apply to any arbitration here under. Any controversy concerning whether an Agreement Dispute is an arbitrable Agreement Dispute, whether arbitra tion has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the interpretation of enforceability of this Article V shall be determined by the arbitrator. The arbitrator shall be a retired or former judge of any United States District Court or Court of Appeals or such other qualified person as the relevant parties may agree to designate, provided such individual has had -------- substantial professional experience with regard to settling commercial disputes. The parties intend that the provisions to arbitrate set forth herein be valid, enforce able and irrevocable. The designation of a situs or a governing law for this Agreement or the arbitration shall not be deemed an election to preclude application of the Federal Arbitration Act, if it would be applicable. In his award the arbitrator shall allocate, in his discretion, among the parties to the arbitration all costs of the arbitration, including the fees and expenses of the arbitrator and reasonable attorneys' fees, costs and expert witness expenses of the parties. The undersigned agree to comply with any award made in any such arbitration pro ceedings that has become final in accordance with the Rules and agree to the entry of a judgment in any jurisdiction upon any award rendered in such proceedings becoming final under the Rules. The arbitrator shall be entitled, if appropriate, to award any remedy in such proceedings, 24 including monetary damages, specific performance and all other forms of legal and equitable relief; provided, how ever, the arbitrator shall not be entitled -------- -------- to award punitive damages. ARTICLE VI Insurance --------- SECTION 6.01. Coverage. (a) As of the Distribution Date, coverage of -------- Arch and its Subsidiaries shall cease under current Company Policies, except as provided in this Article VI. From and after the Distribution Date, Arch and its Subsidiaries will be responsible for obtaining and maintaining insurance coverages for their own account. To the extent that Arch bears or incurs Arch Liabilities arising from the activities of Olin or its Subsidiaries prior to the Distribution Date, and which Arch Liabilities are covered by Company Policies, it is the intention of the parties that, without increasing or expanding the risks assumed by the insurer, Arch will have the benefit of such insurance coverage after the Distribution Date. No assignment pursuant to Section 6.02 is intended to increase the liability of any insurer under a Company Policy, and Olin shall be deemed to assign only such coverage as would have been available to Olin in respect of the Arch Business if the Distribution had not occurred. (b) To the extent that Olin bears or incurs Olin Liabilities arising from the activities of Hunt prior to the Distribution Date, and which Olin Liabilities are covered by Hunt Policies, it is the intention of the parties that, without increasing or expanding the risks assumed by the insurer, Olin will have the benefit of such insurance coverage after the Distribution Date. No assignment pursuant to Section 6.02 is intended to increase the liability of any insurer under a Hunt Policy, and Arch shall be deemed to assign only such coverage as would have been available in respect of the activities of Hunt if the Distribution had not occurred. SECTION 6.02. Claims Based Upon Pre-Distribution Date Injury; Waiver. ------------------------------------------------------- (a) If (i) prior to the Distribution Date, any person has asserted a claim or instituted a suit, action or proceeding against Olin or Arch, or (ii) subsequent to the Distribution Date, any person shall assert a claim or institute a suit, action or proceeding against Arch or any of its Subsidiaries, in either case, with respect to any injury, loss, liability, damage or expense incurred or claimed to have been incurred prior to the Distribution Date in the course of or in connection with 25 the conduct of the Arch Business and which injury, loss, liability, damage or expense may constitute an insured or insurable occurrence under one or more Company Policies, Olin shall be deemed, without need of further documentation, to assign to Arch or any of its Subsidiaries an interest in the relevant Company Policies (unless such assignment would render Olin's coverage for such occurrence thereunder void), subject to any limitations or obligations of Arch contemplated by this Article VI, if necessary, and then only to the extent necessary, to convey to Arch or any of its Subsidiaries rights of indemnity and the right to be defended by or at the expense of the insurer, with respect to any such claim, suit, action, proceeding, injury, loss, liability, damage or expense; provided, however, that, with respect to Company Policies for which -------- ------- Arch has payment obligations pursuant to Section 6.05 or otherwise, Arch and its Subsidiaries shall only have the rights set forth under this Section 6.02(a) with respect to such Company Policies if such payment obligations have been satisfied by Arch. (b) If (i) prior to the Distribution Date, any person has asserted a claim or instituted a suit, action or proceeding against Olin, or (ii) subsequent to the Distribution Date, any person shall assert a claim or institute a suit, action or proceeding against Olin, in either case, with respect to any injury, loss, liability, damage or expense incurred or claimed to have been incurred prior to the Distribution Date in the course of or in connection with the activities of Hunt and which injury, loss, liability, damage or expense may constitute an insured or insurable occurrence under one or more Hunt Policies, Arch shall be deemed, without need or further documentation, to assign to Olin an interest in the relevant Hunt Policies (unless such assignment would render Arch's coverage for such occurrence thereunder void), subject to any limitations or obligations of Olin contemplated by this Article VI, if necessary, and then only to the extent necessary, to convey to Olin rights of indemnity and the right to be defended by or at the expense of the insurer, with respect to any such claim, suit, action, proceeding, injury, loss, liability, damage or expense; provided, however, that, with respect to Hunt Policies for -------- ------- which Olin has payment obligations pursuant to Section 6.05 or otherwise, Olin shall only have the rights set forth under this Section 6.02(b) with respect to such Hunt Policies if such payment obligations have been satisfied by Olin. (c) Olin shall at all times retain the Company Policies, together with the rights, benefits and privileges thereunder, including the right to invade or exhaust any Company Policy by submission of claims, settlement or 26 otherwise; provided, that the retention of the Company Policies by Olin is not -------- intended to limit, inhibit or preclude any right granted pursuant to Section 6.02(a), and provided further that Section 6.02(a) is not intended to limit, ---------------- inhibit or preclude any rights, benefits or privileges Olin may have under Company Policies. Arch hereby specifically agrees that Olin, in its sole discretion, may at any time and without the consent of Arch or any of its Subsidiaries, grant a release, given in good faith, to any insurance carrier absolving such carrier from further liability to Arch pursuant to any Company Policy, only in respect of Litigated Arch Liabilities (as defined below). Olin shall notify Arch of the terms and conditions of any such release prior to its execution. Any release by Olin of coverage obligations under any Company Policy in respect of Arch Liabilities other than or in addition to those in respect of Litigated Arch Liabilities shall require the written consent of Arch, which consent shall not be unreasonably withheld. (d) Arch shall at all times retain the Hunt Policies, together with the rights, benefits and privileges thereunder, including the right to invade or exhaust any Hunt Policy by submission of claims, settlement or otherwise; provided, that the retention of the Hunt Policies by Arch is not intended to - -------- limit, inhibit or preclude any right granted pursuant to Section 6.02(b), and provided further that Section 6.02(b) is not intended to limit, inhibit or - ---------------- preclude any rights, benefits or privileges that Arch may have under the Hunt Policies. Arch hereby agrees that Olin, in its sole discretion, may at any time and without the consent of Arch grant a release, given in good faith, to any insurance carrier absolving such carrier from further liability to Arch pursuant to any Hunt Policy only in respect of Litigated Arch Liabilities. Olin shall notify Arch of the terms and conditions of any such release prior to its execution. Any release by Arch of coverage obligations under any Hunt Policy in respect of Olin Liabilities shall require the written consent of Olin, which consent shall not be unreasonably withheld. SECTION 6.03. Administration. Except as provided in the third --------------- sentence of this Section 6.03, from and after the Distribution Date, Olin shall be responsible for Claims Administration with respect to Olin Liabilities and Arch or a Subsidiary of Arch, as appropriate, shall be responsible for Claims Administration with respect to Arch Liabilities. Except as provided in the third sentence of this Section 6.03, Olin hereby appoints Arch as its agent and attorney in fact to perform Claims Administration under Company Policies with respect to claims against Olin which 27 are or may give rise to Arch Liabilities, and Arch hereby appoints Olin as its agent and attorney in fact to perform Claims Administration under Hunt Policies with respect to claims against Arch or Hunt which are or may give rise to Olin Liabilities. Notwithstanding the foregoing, Olin shall be responsible for Claims Administration with respect to Arch Liabilities with respect to which Olin is engaged in coverage litigation, as of the Distribution Date, related to environmental remediation, and with respect to Arch Liabilities related to environmental remediation which become known after the Distribution Date, and which Olin shall add to said coverage litigation, if then still pending ("Litigated Arch Liabilities"). SECTION 6.04. Insurance Proceeds. Proceeds received with respect to ------------------- claims made under Company Policies or Hunt Policies shall be paid to Olin with respect to Olin Liabilities and to Arch with respect to Arch Liabilities; provided, that proceeds received with respect to Litigated Arch Liabilities - -------- shall be allocated between Olin and Arch pro rata based on the remediation related amounts actually expended by the parties in connection therewith. SECTION 6.05. Retrospectively Rated Policies. From and after the ------------------------------- Distribution Date, any additional premiums payable or rebates of premiums previously paid in respect of any retrospectively rated Company Policy shall be paid or collected by Olin. Olin shall be reimbursed by Arch, or shall distribute to Arch, amounts equal to the portion of any such additional premium or rebate, as applicable, which relates to the Arch Business. From and after the Distribution Date, any additional premiums payable or rebates of premiums previously paid in respect of any retrospectively rated Hunt Policy shall be paid or collected by Arch. Arch shall be reimbursed by Olin, or shall distribute to Olin, amounts equal to the portion of any such additional premium or rebate, as applicable, which do not relate to the Arch Business. SECTION 6.06. Agreement for Waiver of Conflict and Shared Defense. ---------------------------------------------------- In the event that Insured Claims of more than one of the parties hereto exist relating to the same occurrence, the parties shall jointly defend and waive any conflict of interest necessary to the conduct of the joint defense. Nothing in this Section 6.06 shall be construed to limit or otherwise alter in any way the obliga tions of the parties to this Agreement, including those created by this Agreement, by operation of law or otherwise. SECTION 6.07. Cooperation. The parties hereto agree to use their ------------ commercially reasonable efforts to 28 cooperate with respect to the various insurance matters contemplated by this Agreement. If the product aggregates in the Company Policies or the Hunt Policies become exhausted, the parties agree to share the losses which otherwise would have been reimbursed by such Policies, but for the exhaustion of such product aggregates, on terms and in proportions that are equitable under the circumstances. ARTICLE VII Indemnification --------------- SECTION 7.01. Indemnification (a) Arch shall indemnify, defend and --------------- hold harmless Olin, each Affiliate of Olin and each of their respective directors, officers, employees and agents, and each of the heirs, successors and assigns of any of the foregoing (the "Olin Indemnitees") from and against all claims, damages, losses, liabilities, fines, penalties, costs and expenses (including without limitation reasonable attorneys' fees and disbursements) (collectively, "Indemnifiable Losses") of the Olin Indemnitees arising out of, associated with, or resulting from the Arch Liabilities (including without limitation the failure or alleged failure by Arch to pay, perform or otherwise discharge such Arch Liabilities in accordance with their terms), whether such Indemnifiable Losses relate to or arise from events, occurrences, actions, omissions, facts or circumstances occurring or existing, or whether such Indemnifiable Losses are asserted, before, on or after the Distribution Date. (b) Olin shall indemnify, defend and hold harmless Arch, each Affiliate of Arch and each of their respective directors, officers, employees and agents, and each of the heirs, successors and assigns of any of the foregoing (the "Arch Indemnitees") from and against all Indemnifiable Losses of the Arch Indemnitees arising out of, associated with, or resulting from the Olin Liabilities (including without limitation the failure or alleged failure by Olin to pay, perform or otherwise discharge such Olin Liabilities in accordance with their terms), whether such Indemnifiable Losses relate to or arise from events, occurrences, actions, omissions, facts or circumstances occurring or existing, or whether such Indemnifiable Losses are asserted, before, on or after the Distribution Date. SECTION 7.02. Insurance Matters. The amount which any indemnifying ----------------- party (an "Indemnifying Party") is or may be required to pay to any indemnified party (an 29 "Indemnified Party") under this Article VII shall be reduced (including without limitation retroactively) by any proceeds of insurance policies or other amounts actually recovered by or on behalf of such Indemnified Party in reduction of the related Indemnifiable Loss. If an Indemnified Party shall have received the payment (an "Indemnity Payment") required by this Agreement from an Indemnifying Party in respect of any Indemnifiable Loss and shall subsequently actually receive proceeds of insurance policies or other amounts in respect of such Indemnifiable Loss, then such Indemnified Party shall pay to such Indemnifying Party a sum equal to the amount actually received (up to but not in excess of the amount of any Indemnity Payment made hereunder). An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto, or, solely by virtue of the indemnification provisions of this Article VII, or have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other third party shall be entitled to a benefit they would not otherwise be entitled to receive in the absence of the indemnification provisions hereof by virtue of the indemnification provisions hereof. SECTION 7.03. Procedures for Indemnification. (a) Pending Claims. ------------------------------ --------------- (i) On the Distribution Date, Arch shall assume (or shall cause one of its wholly owned Subsidiaries to assume) (A) the prosecution of all claims of Arch and (B) the defense against all Third Party Claims, in each case, that are listed on Schedule 1.01(f). (ii) Arch shall be responsible for attorneys' fees, disbursements and other costs related to the claims set forth in Section 7.03(a)(i) only as and to the extent that such costs are accrued or incurred subsequent to the Distribution Date, and shall not be responsible for any of such costs to the extent accrued or incurred on or prior to the Distribution Date. (b) Third Party Claims. (i) If a claim or demand is made against an ------------------ Indemnified Party by any person who is not a party to this Agreement (a "Third Party Claim") as to which such Indemnified Party is entitled to indemnification pursuant to this Agreement, such Indemnified Party shall notify the Indemnifying Party in writing, and in reasonable detail, of the Third Party Claim promptly (and in any event within 15 business days) after receipt by such Indemnified Party of written notice of the Third Party Claim; provided, however, that -------- ------- failure to give such notification shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure (except that the 30 Indemnifying Party shall not be liable for any expenses incurred during the period in which the Indemnified Party failed to give such notice). Thereafter, the Indemnified Party shall deliver to the Indemnifying Party, promptly (and in any event within 15 business days) after the Indemnified Party's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Third Party Claim. (ii) If a Third Party Claim is made against an Indemnified Party, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses and acknowledges in writing its obligation to indemnify the Indemnified Party therefor, to assume the defense thereof with counsel selected by the Indemnifying Party; provided, however, that such counsel is not -------- ------- reasonably objected to by the Indemnified Party. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party for legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof. If the Indemnifying Party assumes such defense, the Indemnified Party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party shall control such defense. The Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnified Party for any period during which the Indemnifying Party has failed to assume the defense thereof (other than during the period prior to the time the Indemnified Party shall have given notice of the Third Party Claim as provided above). If the Indemnifying Party so elects to assume the defense of any Third Party Claim, the Indemnified Party shall cooperate with the Indemnifying Party in the defense or prosecution thereof. (iii) If the Indemnifying Party acknowledges in writing its obligation to indemnify the Indemnified Party for a Third Party Claim, then in no event will the Indemnified Party admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the Indemnifying Party's prior written consent; provided, however, that the Indemnified Party -------- ------- shall have the right to settle, compromise or discharge such Third Party Claim without the consent of the Indemnifying Party if the Indemnified Party releases the Indemnifying Party from its indemnification obligation hereunder with respect to such Third Party Claim and such settlement, compromise or discharge would not otherwise adversely affect the Indemnifying Party. If the Indemnifying Party acknowledges 31 in writing its obligation to indemnify the Indemnified Party for a Third Party Claim, the Indemnified Party will agree to any settlement, compromise or discharge of a Third Party Claim that the Indemnifying Party may recommend and that by its terms obligates the Indemnifying Party to pay the full amount of the liability in connection with such Third Party Claim and releases the Indemnified Party completely in connection with such Third Party Claim and that would not otherwise adversely affect the Indemnified Party; provided, however, that the -------- ------- Indemnified Party may refuse to agree to any such settlement, compromise or discharge if the Indemnified Party agrees that the Indemnifying Party's indemnification obligation with respect to such Third Party Claim shall not exceed the amount that would be required to be paid by or on behalf of the Indemnifying Party in connection with such settlement, compromise or discharge. (iv) Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim (and shall be liable for the fees and expenses of counsel incurred by the Indemnified Party in defending such Third Party Claim) if the Third Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnified Party which the Indemnified Party reasonably determines, after conferring with its counsel, cannot be separated from any related claim for money damages. If such equitable relief or other relief portion of the Third Party Claim can be so separated from that for money damages, the Indemnifying Party shall be entitled to assume the defense of the portion relating to money damages. SECTION 7.04 Indemnification Payments. Indemni fication required by ------------------------ this Agreement, shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnifiable Loss is incurred. SECTION 7.05 Other Adjustments. (a) The amount of any ----------------- indemnification obligation with respect to any Third Party Claim ("Indemnity Obligation") shall be (x) increased to take into account any net tax cost actually incurred by the Indemnified Party arising from any payments received from the Indemnifying Party (grossed up for such increase) and (y) reduced to take into account any net tax benefit actually realized by the Indemnified Party arising from the incurrence or payment of any such Indemnity Obligation. In computing the amount of such tax cost or tax benefit, the Indemnified Party shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt of any payment 32 with respect to an Indemnity Obligation or the incurrence or payment of any Indemnity Obligation. (b) In addition to any adjustments required pursuant to Section 7.02 hereof or clause (a) of this Section 7.05, and subject to such clause (a), if the amount of any Indemnity Obligation shall, at any time subsequent to the payment required by this Agreement, be reduced by recovery, settlement or otherwise, the amount of such reduction, less any expenses incurred in connection therewith, shall promptly be repaid by the Indemnified Party to the Indemnifying Party up to the aggregate amount of any payments received from such Indemnifying Party pursuant to this Agreement in respect of such Indemnity Obligation. SECTION 7.06. Consolidation, Merger, Transfer, or Lease. Neither ----------------------------------------- Party shall consolidate with or merge into any other person, or convey, transfer or lease its properties and assets substantially as an entirety to any other person unless: (a) The person formed by such consolidation or into which said Party is merged or the person which acquires by conveyance or transfer, or which leases the properties and assets of said Party substantially as an entirely shall (i) be a corporation, (ii) be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and (iii) expressly assume, by an instrument satisfactory to the other Party, each and every obligation of said Party to be performed or observed hereunder; and (b) Said Party shall have delivered to the other Party a Certificate executed by its Chief Executive Officer and Chief Financial Officer stating that such consolidation, merger, conveyance, transfer or lease complies with this Section 7.06 and that all conditions precedent herein relating to such transaction have been complied with. SECTION 7.07. Survival. All the indemnity obligations under this -------- Article VII shall survive indefinitely. ARTICLE VIII Miscellaneous ------------- SECTION 8.01. Conditions to Obligations. (a) The obligations of Olin -------------------------- to consummate the Distribution are subject to the satisfaction (or waiver by the Olin Board) of 33 each of the following conditions: (i) all material regulatory approvals necessary to consummate the Distribution shall have been received and be in full force and effect; (ii) the transactions contemplated by Article II shall have been consummated in all material respects, to the extent required to be consummated prior to the Distribution; (iii) the Form 10 shall have become effective under the Exchange Act, and no stop order or similar Commission proceeding shall be in effect with respect to the Form 10, and no proceeding for that purpose shall have been instituted by the Commission; (iv) Arch's Board of Directors, as described in the Information Statement, shall have been elected by Olin, as sole shareowner of Arch, and each of the Articles, the By-laws and the Rights Plan shall be in effect; (v) the Arch Common Shares shall have been accepted for listing on the NYSE, subject to official notice of issuance; (vi) the Olin Board shall have received an opinion of counsel satisfactory in form and substance to the Olin Board in its sole discretion to the effect that the Distribution will not be taxable to the holders of Olin Common Stock pursuant to Sections 355 and 368(a)(1)(D) of the Code; (vii) no order, preliminary or permanent injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Distribution shall be in effect and no other event shall have occurred or failed to occur that prevents consummation of the Distribution; (viii) the Olin Board shall have formally approved the Distribution; and (ix) each of the Ancillary Agreements shall have been executed and delivered by the applicable parties. (b) The foregoing conditions are for the sole benefit of Olin and shall not give rise to any duty on the part of Olin or the Olin Board to waive or not waive such 34 conditions or in any way limit Olin's right to terminate this Agreement as set forth in Section 8.13 or alter the consequences of any such termination from those specified in such Section. Any determination made by the Olin Board prior to the Distribution Date concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 8.01 shall be conclusive. SECTION 8.02. Exhibits and Schedules; Interpretation. The headings --------------------------------------- contained in this Agreement or in any Exhibit or Schedule hereto and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as is set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meanings as defined in this Agreement. References to an "Exhibit" or to a "Schedule" are, unless otherwise specified, to one of the Exhibits or Schedules attached to this Agreement, and references to a "Section" or an "Article" are, unless otherwise specified, to one of the Sections or Articles of this Agreement. For all purposes hereof, the terms "including", "includes" or "include" shall be deemed followed by the words "without limitation". In the event of any inconsistency between this Agreement and any Schedule hereto, the Schedule shall prevail. Notwith standing any other provisions in this Agreement to the contrary, in the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of any Ancillary Agreement, such Ancillary Agreement shall control. SECTION 8.03. Entire Agreement. This Agreement, including the ----------------- Exhibits and Schedules, and the Ancillary Agreements shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. SECTION 8.04. Ancillary Agreements. This Agree ment is not intended --------------------- to address, and should not be inter preted to address, the matters specifically and expressly covered by the Ancillary Agreements. SECTION 8.05. Counterparts. This Agreement may be executed in one or ------------- more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been 35 signed by each of the parties and delivered to the other parties. SECTION 8.06. Survival of Agreements. Except as otherwise expressly ----------------------- provided in this Agreement, all covenants and agreements of the parties contained in this Agreement shall survive the Distribution Date. SECTION 8.07. Expenses. Except as otherwise set forth in this --------- Agreement or any Ancillary Agreement, all costs and expenses incurred on or prior to the Distribution Date (whether or not paid on or prior to the Distribution Date) in connection with the preparation, execution, deliv ery and implementation of this Agreement and any Ancillary Agreement, the Information Statement and the Distribution and the consummation of the transactions contemplated thereby shall be charged to and paid by Olin. Except as otherwise set forth in this Agreement or any Ancillary Agreement, each party shall bear its own costs and expenses incurred after the Distribution Date. SECTION 8.08. Notices. All notices and other communications -------- hereunder shall be in writing and hand deliv ered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic mes sage transmission with delivery confirmed (by voice or otherwise) to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received: To Olin Corporation: 501 Merritt 7 P.O. Box 4500 Norwalk, CT 06851 Attn: Corporate Secretary To Arch Chemicals, Inc.: 501 Merritt 7 Norwalk, CT 06851 Attn: Corporate Secretary SECTION 8.09. Waivers. The failure of either party to require strict -------- performance by the other party of any provision in this Agreement will not waive or diminish that party's right to demand strict performance thereafter of that or any other provision hereof. 36 SECTION 8.10. Amendments. Subject to the terms of Section 8.13 ----------- hereof, this Agreement may not be modified or amended except by an agreement in writing signed by the parties. SECTION 8.11. Assignment. Other than in connection with a ----------- transaction contemplated by Section 7.06, this Agreement shall not be assignable, in whole or in part, directly or indirectly, by any party hereto without the prior written consent of the other, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void. SECTION 8.12. Successors and Assigns. The provi sions of this ----------------------- Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns. SECTION 8.13. Termination. This Agreement may be terminated and the ------------ Distribution may be amended, modified or abandoned at any time prior to the Distribution Date by and in the sole discretion of Olin without the approval of Arch or the shareholders of Olin. In the event of such termination, no party shall have any liability of any kind to any other party or any other person. After the Distribution Date, this Agreement may not be terminated except by an agreement in writing signed by the parties. SECTION 8.14. Subsidiaries. Each of the parties hereto shall cause ------------- to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such party or by any entity that is contemplated to be a Subsidiary of such party after the Distribution. SECTION 8.15. Third Party Beneficiaries. This Agreement is solely -------------------------- for the benefit of the parties hereto and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. SECTION 8.16. Attorney Fees. Except as contem plated by the third to -------------- the last sentence of Article V hereof, a party in breach of this Agreement shall, on demand, indemnify and hold harmless the other parties hereto for and against all out-of-pocket expenses, including legal fees, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement. The payment of such expenses is in addition to 37 any other relief to which such other party may be entitled hereunder or otherwise. SECTION 8.17. Title and Headings. Titles and headings to sections ------------------- herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. SECTION 8.18. Exhibits and Schedules. The Exhibits and Schedules ----------------------- shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. SECTION 8.19. Specific Performance. Each of the parties hereto --------------------- acknowledges that there is no adequate remedy at law for failure by such parties to comply with the provi sions of this Agreement and that such failure would cause immediate harm that would not be adequately compensable in damages, and therefore agree that their agreements contained herein may be specifically enforced without the requirement of posting a bond or other security, in addition to all other remedies available to the parties hereto under this Agreement. SECTION 8.20. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND -------------- CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA APPLICABLE TO CONTRACTS EXECUTED THEREIN AND TO BE PERFORMED THEREIN. SECTION 8.21. Consent to Jurisdiction. Without limiting the ------------------------ provisions of Article V hereof, each of the parties irrevocably submits to the exclusive personal jurisdiction and venue of (a) the Circuit Court of Henrico County, Commonwealth of Virginia, and (b) the United States District Court for the Eastern District of Virginia (Richmond Division), for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the Eastern District of Virginia (Richmond Division) or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Circuit Court of the Henrico County, Commonwealth of Virginia. Each of the parties further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth above shall be effective service of process for any action, suit or proceeding in Virginia with respect to any matters to which it has submitted to jurisdiction in this Section 8.21. Each of the parties irrevocably and unconditionally waives any objection 38 to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Circuit Court of Henrico County, Commonwealth of Virginia, or (ii) the United States District Court for the Eastern District of Virginia (Richmond Division), and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum, and the right to object, with respect to such action, suit or proceeding, that such court does not have jurisdiction over such Party. SECTION 8.22. Severability. In the event any one or more of the ------------- provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. OLIN CORPORATION, by ____________________________ Name: Title: ARCH CHEMICALS, INC., by ____________________________ Name: Title: 39 The following is an identification of the contents of all omitted schedules and exhibits to the Distribution Agreement. Arch Chemicals, Inc. will furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request. SCHEDULES Schedule 1.01(a) - Real Estate Schedule 1.01(b) - Equity Interests Schedule 1.01(c) - Certain Additional Transferred Assets Schedule 1.01(d) - Retained Assets Schedule 1.01(e) - Retained Businesses Schedule 1.01(f) - Litigation Schedule 1.01(g) - Certain Contractual Liabilities Schedule 1.01(h) - Certain Additional Liabilities Schedule 1.01(i) - Certain Excluded Liabilities Schedule 1.01(j) - Arch Product Lines Schedule 2.08 - Guarantees Schedule 3.04 - Contract Provisions EX-3.1 3 AMENDMENT AND RESTATED ARTICLES OF INCORPORATION EXHIBIT 3.1 ================================================================================ AMENDED AND RESTATED ARTICLES OF INCORPORATION of ARCH CHEMICALS, INC. ================================================================================ AMENDED AND RESTATED ARTICLES OF INCORPORATION OF ARCH CHEMICALS, INC. ARTICLE I The name of the Corporation shall be Arch Chemicals, Inc. ARTICLE II The purpose for which the Corporation is formed is to transact any or all lawful business, not required to be specifically stated in these Articles of Incorporation, for which corporations may be incorporated under the Virginia Stock Corporation Act, as amended from time to time, and any legislation succeeding thereto (the "VSCA"). All references herein to "Articles of Incorporation" shall mean these Amended and Restated Articles of Incorporation, as subsequently amended or restated in accordance herewith and with the VSCA. ARTICLE III The aggregate number of shares that the Corporation shall have authority to issue shall be 10,000,000 shares of Preferred Stock, par value $1 per share (hereinafter called "Preferred Stock"), and 100,000,000 shares of Common Stock, par value $1 per share (hereinafter called "Common Stock"). The following is a description of each of such classes of stock, and a statement of the preferences, limitations, voting rights and relative rights in respect of the shares of each such class: 1. Authority to Fix Rights of Preferred Stock. The Board of ------------------------------------------ Directors shall have authority, by resolution or resolutions, at any time and from time to time to divide and establish any or all of the unissued shares of Preferred Stock not then allocated to any series of Preferred Stock into one or more series, and, without limiting the generality of the foregoing, to fix and determine the designation of each such series, the number of shares that shall constitute such series and the following relative rights and preferences of the shares of each series so established: (a) The annual or other periodic dividend rate payable on shares of such series, the time of payment thereof, whether such dividends shall be cumulative or non-cumulative, and the date or dates from which any cumulative dividends shall commence to accrue; (b) the price or prices at which and the terms and conditions, if any, on which shares of such series may be redeemed; (c) the amounts payable upon shares of such series in the event of the voluntary or involuntary dissolution, liquidation or winding-up of the affairs of the Corporation; (d) the sinking fund provisions, if any, for the redemption or purchase of shares of such series; (e) the extent of the voting powers, if any, of the shares of such series; (f) the terms and conditions, if any, on which shares of such series may be converted into shares of stock of the Corporation of any other class or classes or into shares of any other series of the same or any other class or classes; (g) whether, and if so the extent to which, shares of such series may participate with the Common Stock in any dividends in excess of the preferential dividend fixed for shares of such series or in any distribution of the assets of the Corporation, upon a liquidation, dissolution or winding-up thereof, in excess of the preferential amount fixed for shares of such series; and (h) any other preferences and relative, optional or other special rights, and qualifications, limitations or restrictions of such preferences or rights, of shares of such series not fixed and determined by law or in this Article III. 2. Distinctive Designations of Series. Each series of Preferred ---------------------------------- Stock shall be so designated as to distinguish the shares thereof from the shares of all other series. Different series of Preferred Stock shall not be considered to constitute different voting groups of shares for the purpose of voting by voting groups except as required by the VSCA or as otherwise specified by the Board of Directors with respect to any series at the time of the creation thereof. 3. Restrictions on Certain Distributions. So long as any shares of ------------------------------------- Preferred Stock are outstanding, the Corporation shall not declare and pay or set apart 2 for payment any dividends (other than dividends payable in Common Stock or other stock of the Corporation ranking junior to the Preferred Stock as to dividends) or make any other distribution on such junior stock if, at the time of making such declaration, payment or distribution, the Corporation shall be in default with respect to any dividend payable on, or any obligation to redeem, any shares of Preferred Stock. 4. Redeemed or Reacquired Shares. Shares of any series of Preferred ----------------------------- Stock that have been redeemed or otherwise reacquired by the Corporation (whether through the operation of a sinking fund, upon conversion or otherwise) shall have the status of authorized and unissued shares of Preferred Stock and may be redesignated and reissued as a part of such series (unless prohibited by the articles of amendment creating such series) or of any other series of Preferred Stock. Shares of Common Stock that have been reacquired by the Corporation shall have the status of authorized and unissued shares of Common Stock and may be reissued. 5. Voting Rights. Subject to the provisions of the VSCA or of the ------------- Bylaws of the Corporation as from time to time in effect with respect to the closing of the transfer books or the fixing of a record date for the determination of shareholders entitled to vote, and except as otherwise provided by the VSCA or in resolutions of the Board of Directors establishing any series of Preferred Stock pursuant to the provisions of paragraph 1 of this Article III, the holders of outstanding shares of Common Stock of the Corporation shall exclusively possess voting power for the election of directors and for all other purposes, with each holder of record of shares of Common Stock of the Corporation being entitled to one vote for each share of such stock standing in his name on the books of the Corporation. 6. No Preemptive Rights. No holder of shares of stock of any class -------------------- of the Corporation shall, as such holder, have any right to subscribe for or purchase (a) any shares of stock of any class of the Corporation, or any warrants, options or other instruments that shall confer upon the holder thereof the right to subscribe for or purchase or receive from the Corporation any shares of stock of any class, whether or not such shares of stock, warrants, options or other instruments are issued for cash or services or property or by way of dividend or otherwise, or (b) any other security of the Corporation that shall be convertible into, or exchangeable for, any shares of stock of the Corporation of any class or classes, or to which shall be attached or appurtenant any warrant, option or other instrument that shall confer upon the holder of such security the right to subscribe for or purchase or receive from the Corporation any shares of its stock of any class or classes, whether or not such securities are issued for cash or services or property or by way of dividend or otherwise, other than such right, if any, as the Board of Directors, in its sole discretion, may from time to time determine. If the Board of Directors shall offer to the holders of shares of stock of any class of the Corporation, or any of them, any such shares of stock, options, warrants, instruments or other securities of the Corporation, such offer shall not, in 3 any way, constitute a waiver or release of the right of the Board of Directors subsequently to dispose of other securities of the Corporation without offering the same to said holders. 7. Control Share Acquisition Statute. The provisions of Article --------------------------------- 14.1 of the VSCA shall not apply to acquisitions of shares of any class of capital stock of the Corporation. 8. Series A Participating Cumulative Preferred Stock. There is ------------------------------------------------- hereby established a series of the Corporation's authorized Preferred Stock, to be designated as the "Series A Participating Cumulative Preferred Stock, par value $1 per share." The designation and number, and relative rights, preferences and limitations of the Series A Participating Cumulative Preferred Stock, insofar as not already fixed by any other provision of the Articles of Incorporation, shall be as follows: SECTION 1. Designation and Number of Shares. The shares of such -------------------------------- series shall be designated as "Series A Participating Cumulative Preferred Stock" (the "Series A Preferred Stock"), par value $1 per share. The number of shares initially constituting the Series A Preferred Stock shall be 30,000; provided, however, that, if more than -------- ------- a total of 30,000 shares of Series A Preferred Stock shall be issuable upon the exercise of Rights (the "Rights") issued pursuant to the Rights Agreement dated as of January 29, 1999, between the Corporation and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights Agreement"), the Board of Directors of the Corporation, pursuant to Section 13.1-639 of the VSCA, shall direct by resolution or resolutions that articles of amendment of the Articles of Incorporation of the Corporation be properly executed and filed with the State Corporation Commission of Virginia providing for the total number of shares of Series A Preferred Stock authorized to be issued to be increased (to the extent that the Articles of Incorporation then permit) to the largest number of whole shares (rounded up to the nearest whole number) issuable upon exercise of such Rights. SECTION 2. Dividends or Distributions. (a) Subject to the prior -------------------------- and superior rights of the holders of shares of any other series of Preferred Stock or other class of capital stock of the Corporation ranking prior and superior to the shares of Series A Preferred Stock with respect to dividends, the holders of shares of the Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of the assets of the Corporation legally available therefor, (i) quarterly dividends payable in cash on the last day of each fiscal quarter in each year, or such other dates as the Board of Directors of the Corporation shall approve (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or a 4 fraction of a share of Series A Preferred Stock, in the amount of $.01 per whole share (rounded to the nearest cent), less the amount of all cash dividends declared on the Series A Preferred Stock pursuant to the following clause (ii) since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock (the total of which shall not, in any event, be less than zero) and (ii) dividends payable in cash on the payment date for each cash dividend declared on the Common Stock in an amount per whole share (rounded to the nearest cent) equal to the Formula Number (as hereinafter defined) then in effect times the cash dividends then to be paid on each share of Common Stock. In addition, if the Corporation shall pay any dividend or make any distribution on the Common Stock payable in assets, securities or other forms of non-cash consideration (other than dividends or distributions solely in shares of Common Stock), then, in each such case, the Corporation shall simultaneously pay or make on each outstanding whole share of Series A Preferred Stock a dividend or distribution in like kind equal to the Formula Number then in effect times such dividend or distribution on each share of the Common Stock. As used herein, the "Formula Number" shall be 1,000; provided, however, that, if at any time after February 9, 1999, the Corporation shall (x) declare or pay any dividend on the Common Stock payable in shares of Common Stock or make any distribution on the Common Stock in shares of Common Stock, (y) subdivide (by a stock split or otherwise) the outstanding shares of Common Stock into a larger number of shares of Common Stock or (z) combine (by a reverse stock split or otherwise) the outstanding shares of Common Stock into a smaller number of shares of Common Stock, then, in each such event, the Formula Number shall be adjusted to a number determined by multiplying the Formula Number in effect immediately prior to such event by a fraction, the numerator of which is the number of shares of Common Stock that are outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event (and rounding the result to the nearest whole number); and provided further, that, if at any time after February 9, -------- ------- 1999, the Corporation shall issue any shares of its capital stock in a merger, reclassification, or change of the outstanding shares of Common Stock, then, in each such event, the Formula Number shall be appropriately adjusted to reflect such merger, reclassification or change so that each share of Preferred Stock continues to be the economic equivalent of a Formula Number of shares of Common Stock prior to such merger, reclassification or change. (b) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in Section 2(a) immediately prior to or at the same time it declares a dividend or distribution on the Common Stock (other than a dividend or distribution solely in shares of Common Stock); 5 provided, however, that, in the event no dividend or distribution -------- ------- (other than a dividend or distribution in shares of Common Stock) shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $.01 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a dividend or distribution declared thereon, which record date shall be the same as the record date for any corresponding dividend or distribution on the Common Stock. (c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from and after the Quarterly Dividend Payment Date next preceding the date of original issue of such shares of Series A Preferred Stock; provided, however, -------- ------- that dividends on such shares that are originally issued after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and on or prior to the next succeeding Quarterly Dividend Payment Date shall begin to accrue and be cumulative from and after such Quarterly Dividend Payment Date. Notwithstanding the foregoing, dividends on shares of Series A Preferred Stock that are originally issued prior to the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend on the first Quarterly Dividend Payment Date shall be calculated as if cumulative from and after the last day of the fiscal quarter next preceding the date of original issuance of such shares. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. (d) So long as any shares of the Series A Preferred Stock are outstanding, no dividends or other distributions shall be declared, paid or distributed, or set aside for payment or distribution, on the Common Stock, unless, in each case, the dividend required by this Section 2 to be declared on the Series A Preferred Stock shall have been declared. (e) The holders of the shares of Series A Preferred Stock shall not be entitled to receive any dividends or other distributions, except as provided herein. SECTION 3. Voting Rights. The holders of shares of Series A ------------- Preferred Stock shall have the following voting rights: 6 (a) Each holder of Series A Preferred Stock shall be entitled to a number of votes equal to the Formula Number then in effect, for each share of Series A Preferred Stock held of record on each matter on which holders of the Common Stock or shareholders generally are entitled to vote, multiplied by the maximum number of votes per share that any holder of the Common Stock or shareholders generally then have with respect to such matter (assuming any holding period or other requirement to vote a greater number of shares is satisfied). (b) Except as otherwise provided in this Section 3 or by the VSCA, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one voting group for the election of directors of the Corporation and on all other matters submitted to a vote of shareholders of the Corporation. (c) If, at the time of any annual meeting of shareholders at which the election of directors is to be considered, the equivalent of six quarterly dividends (whether or not consecutive) payable on any share or shares of Series A Preferred Stock are in default, the number of directors constituting the Board of Directors of the Corporation shall be increased by two. In addition to voting together with the holders of Common Stock for the election of other directors of the Corporation, the holders of record of the Series A Preferred Stock, voting as a single voting group, to the exclusion of the holders of Common Stock, shall be entitled at said meeting of shareholders (and at each subsequent annual meeting of shareholders), unless all dividends in arrears have been paid or declared and set apart for payment prior thereto, to vote for the election of two directors of the Corporation, the holders of any Series A Preferred Stock being entitled to cast a number of votes per share of Series A Preferred Stock equal to the Formula Number. Until the default in payments of all dividends that permitted the election of said directors shall cease to exist, any director who shall have been so elected pursuant to the next preceding sentence may be removed at any time, either with or without cause, only by the affirmative vote of the holders of the shares of Series A Preferred Stock at the time entitled to cast a majority of the votes entitled to be cast for the election of any such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled by the vote of such holders. If and when such default shall cease to exist, the holders of the Series A Preferred Stock shall be divested of the foregoing special voting rights, subject to revesting in the event of each and every subsequent like default in payments of dividends. Upon the termination of the foregoing special voting rights, the terms of office of all persons who may have been elected directors pursuant to said special voting rights shall forthwith terminate, and the number of directors constituting the Board of Directors shall be reduced by two. The voting rights granted by this Section 3(c) shall be in 7 addition to any other voting rights granted to the holders of the Series A Preferred Stock in this Section 3. (d) Except as provided in this Section 3, in Section 11 or by the VSCA, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for authorizing or taking any corporate action. SECTION 4. Certain Restrictions. (a) Whenever quarterly -------------------- dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock; provided that the Corporation may at any time redeem, -------- purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good 8 faith will result in fair and equitable treatment among the respective series or classes. (b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. SECTION 5. Liquidation Rights. Upon the liquidation, ------------------ dissolution or winding up of the Corporation, whether voluntary or involuntary, no distribution shall be made (a) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received an amount equal to the accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an amount equal to the greater of (i) $.01 per whole share or (ii) an aggregate amount per share equal to the Formula Number then in effect times the aggregate amount to be distributed per share to holders of Common Stock or (b) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. SECTION 6. Consolidation, Merger, etc. In case the Corporation -------------------------- shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash or any other property, then, in any such case, the then outstanding shares of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share equal to the Formula Number then in effect times the aggregate amount of stock, securities, cash or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is exchanged or changed. In the event both this Section 6 and Section 2 appear to apply to a transaction, this Section 6 will control. SECTION 7. No Redemption; No Sinking Fund. (a) The shares of ------------------------------ Series A Preferred Stock shall not be subject to redemption by the Corporation or at the option of any holder of Series A Preferred Stock; provided, however, that, subject to clause (a)(iv) of Section -------- ------- 4, the Corporation may purchase or otherwise acquire outstanding shares of Series A Preferred Stock in the open market or by offer to any holder or holders of shares of Series A Preferred Stock. 9 (b) The shares of Series A Preferred Stock shall not be subject to or entitled to the operation of a retirement or sinking fund. SECTION 8. Ranking. The Series A Preferred Stock shall rank ------- junior to all other series of Preferred Stock of the Corporation, unless the Board of Directors shall specifically determine otherwise in fixing the powers, preferences and relative, participating, optional and other special rights of the shares of such series and the qualifications, limitations and restrictions of any such other series. SECTION 9. Fractional Shares. The Series A Preferred Stock ----------------- shall be issuable upon exercise of the Rights issued pursuant to the Rights Agreement in whole shares or in any fraction of a share that is one-thousandth (1/1,000) of a share or any integral multiple of such fraction, which shall entitle the holder, in proportion to such holder's fractional shares, to receive dividends, exercise voting rights, participate in distributions and have the benefit of all other rights of holders of Series A Preferred Stock. In lieu of fractional shares, the Corporation, prior to the first issuance of a share or a fraction of a share of Series A Preferred Stock, may elect (a) to make a cash payment as provided in the Rights Agreement for fractions of a share other than one-thousandth (1/1,000) of a share or any integral multiple thereof or (b) to issue depository receipts evidencing such authorized fraction of a share of Series A Preferred Stock pursuant to an appropriate agreement between the Corporation and a depository selected by the Corporation; provided that such agreement shall -------- provide that the holders of such depository receipts shall have all the rights, privileges and preferences to which they are entitled as holders of the Series A Preferred Stock. SECTION 10. Reacquired Shares. Any shares of Series A Preferred ----------------- Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, undesignated as to series, and may thereafter be reissued as part of a new series of such Preferred Shares as permitted by the VSCA. SECTION 11. Amendment. None of the powers, preferences and --------- relative, participating, optional and other special rights of the Series A Preferred Stock as provided herein or in the Articles of Incorporation shall be amended in any manner that would alter or change the powers, preferences, rights or privileges of the holders of Series A Preferred Stock so as to affect such holders adversely without the affirmative vote of the holders of more than 66-2/3% of the outstanding shares of Series A Preferred Stock, voting as a single voting group; provided, however, that no such amendment so approved -------- ------- 10 by the holders of more than 66-2/3% of the outstanding shares of Series A Preferred Stock shall be deemed to apply to the powers, preferences, rights or privileges of any holder of shares of Series A Preferred Stock originally issued upon exercise of a Right after the time of such approval without the approval of such holder. ARTICLE IV 1. The number of directors shall be as specified in the By-laws of the Corporation but such number may be increased or decreased from time to time in such manner as may be prescribed in the By-laws, provided that in no event shall the number of directors exceed ten. In the absence of a By- law specifying the number of directors, the number shall be eight. Commencing with the 1999 annual meeting of shareholders (or by unanimous written consent in lieu thereof), the Board of Directors shall be divided into three classes, Class I, Class II, and Class III, as nearly equal in number as possible. The initial term of each class of directors shall expire at the annual meeting of shareholders to be held in the following years: Class I - 2000; Class II - 2001; and Class III - 2002. At each annual meeting of shareholders after the 1999 annual meeting of shareholders, the successors to the class of directors whose term shall then expire shall be identified as being of the same class of directors they succeed and shall be elected to hold office for a term expiring at the third succeeding annual meeting of shareholders. When the number of directors is changed, any newly-created directorships or any decrease in directorships shall be so apportioned among the classes by the Board of Directors as to make all classes as nearly equal in number as possible; provided, however, that no decrease in the number of directors shall shorten or terminate the term of any incumbent director. 2. Subject to the rights of the holders of any Preferred Stock then outstanding, directors may be removed only with cause and only by the affirmative vote of at least 80 percent of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors ("Voting Stock"), voting together as a single voting group. 3. Subject to the rights of the holders of any Preferred Stock then outstanding and to any limitations set forth in the VSCA, newly-created directorships resulting from any increase in the number of directors and any vacancies in the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled solely (i) by the Board of Directors or (ii) at an annual meeting of shareholders by the shareholders entitled to vote on the election of directors. If the directors remaining in office constitute fewer than a quorum of the Board, they may fill the vacancy by the affirmative vote of a majority of the directors remaining in office. 11 4. Notwithstanding any other provision of the Articles of Incorporation or any provision of law that might otherwise permit a lesser vote, but in addition to any affirmative vote of the holders of any particular voting group required by the VSCA, the Articles of Incorporation or the terms of any Preferred Stock outstanding, the affirmative vote of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single voting group shall be required to alter, amend, repeal or adopt any provision inconsistent with any provision of this Article IV. ARTICLE V Except as expressly otherwise required in the Articles of Incorporation, an amendment or restatement of the Articles of Incorporation requiring shareholder approval shall be approved by a majority of the votes entitled to be cast by each voting group that is entitled to vote on the matter, unless in submitting any such amendment or restatement to the shareholders the Board of Directors shall require a greater vote. ARTICLE VI 1. Every person who is or was a director, officer or employee of the Corporation, or who, at the request of the Corporation, serves or has served in any such capacity with another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise shall be indemnified by the Corporation against any and all liability and reasonable expense that may be incurred by him in connection with or resulting from any claim, action or proceeding (whether brought in the right of the Corporation or any such other corporation, entity, plan or otherwise), in which he may become involved, as a party or otherwise, by reason of his being or having been a director, officer or employee of the Corporation, or such other corporation, entity or plan while serving at the request of the Corporation, whether or not he continues to be such at the time such liability or expense is incurred, unless such person engaged in willful misconduct or a knowing violation of the criminal law. As used in this Article VI: (a) the terms "liability" and "expense" shall include, but shall not be limited to, counsel fees and disbursements and amounts of judgments, fines or penalties against, and amounts paid in settlement by, a director, officer or employee; (b) the terms "director," "officer" and employee," unless the context otherwise requires, include the estate or personal representative of any such person; (c) a person is considered to be serving an employee benefit plan as a director, officer or employee of the plan at the Corporation's request if his duties to the Corporation also impose duties on, or otherwise involve services by, him to the plan or, in connection with the plan, to participants in or beneficiaries of the plan; (d) the term "occurrence" means any act or failure to act, actual or alleged, giving rise to 12 a claim, action or proceeding; and (e) service as a trustee or as a member of a management or similar committee of a partnership, joint venture or limited liability company shall be considered service as a director, officer or employee of the trust, partnership, joint venture or limited liability company. The termination of any claim, action or proceeding, civil or criminal, by judgment, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that a director, officer or employee did not meet the standards of conduct set forth in this paragraph 1. The burden of proof shall be on the Corporation to establish, by a preponderance of the evidence, that the relevant standards of conduct set forth in this paragraph 1 have not been met. 2. Any indemnification under paragraph 1 of this Article VI shall be made unless (a) the Board, acting by a majority vote of those directors who were directors at the time of the occurrence giving rise to the claim, action or proceeding involved and who are not at the time parties to such claim, action or proceeding (provided there are at least five such directors), finds that the director, officer or employee has not met the relevant standards of conduct set forth in such paragraph 1, or (b) if there are not at least five such directors, the Corporation's principal Virginia legal counsel, as last designated by the Board as such prior to the time of the occurrence giving rise to the claim, action or proceeding involved, or in the event for any reason such Virginia counsel is unwilling to so serve, then Virginia legal counsel mutually acceptable to the Corporation and the person seeking indemnification, deliver to the Corporation their written advice that, in their opinion, such standards have not been met. 3. Expenses incurred with respect to any claim, action or proceeding of the character described in paragraph 1 shall, except as otherwise set forth in this paragraph 3, be advanced by the Corporation prior to the final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Article VI. No security shall be required for such undertaking and such undertaking shall be accepted without reference to the recipient's final ability to make repayment. Notwithstanding the foregoing, the Corporation may refrain from, or suspend, payment of expenses in advance if at any time before delivery of the final finding described in paragraph 2, the Board or Virginia legal counsel, as the case may be, acting in accordance with the procedures set forth in paragraph 2, find by a preponderance of the evidence then available that the officer, director or employee has not met the relevant standards of conduct set forth in paragraph 1. 4. No amendment or repeal of this Article VI shall adversely affect or deny to any director, officer or employee the rights of indemnification provided in this Article VI with respect to any liability or expense arising out of a claim, action or proceeding based in whole or substantial part on an occurrence the inception of which 13 takes place before or while this Article VI, as set forth in these Amended and Restated Articles of Incorporation, is in effect. The provisions of this paragraph 4 shall apply to any such claim, action or proceeding whenever commenced, including any such claim, action or proceeding commenced after any amendment or repeal to this Article VI. 5. The rights of indemnification provided in this Article VI shall be in addition to any rights to which any such director, officer or employee may otherwise be entitled by contraction or as a matter of law. 6. In any proceeding brought by or in the right of the Corporation or brought by or on behalf of shareholders of the Corporation, no director or officer of the Corporation shall be liable to the Corporation or its shareholders for monetary damages with respect to any transaction, occurrence or course of conduct, whether prior or subsequent to the effective date of this Article VI, except for liability resulting from such person's having engaged in willful misconduct or a knowing violation of the criminal law or any federal or state securities law. ARTICLE VII In furtherance of, and not in limitation of, the powers conferred by the VSCA, the Board of Directors is expressly authorized and empowered to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that the Bylaws adopted by the Board of Directors under the powers hereby conferred may be altered, amended or repealed by the Board of Directors or by the shareholders having voting power with respect thereto, provided further that, in the case of any such action by shareholders, the affirmative vote of the holders of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single voting group, shall be required in order for the shareholders to alter, amend or repeal any provision of the Bylaws or to adopt any additional Bylaw. Notwithstanding any other provision of the Articles of Incorporation or any provision of law that might otherwise permit a lesser vote, but in addition to any affirmative vote of the holders of any particular voting group required by the VSCA, the Articles of Incorporation or the terms of any Preferred Stock outstanding, the affirmative vote of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single voting group, shall be required to alter, amend, repeal or adopt any provision inconsistent with any of the provisions of this Article VII. 14 EX-3.2 4 BY-LAWS OF ARCH CHEMICALS AS AMENDED EXHIBIT 3.2 BYLAWS OF ARCH CHEMICALS, INC. _____________________________ ARTICLE I. MEETINGS OF SHAREHOLDERS. SECTION 1. PLACE OF MEETINGS. All meetings of the shareholders of ------------------ Arch Chemicals, Inc. (hereinafter called the "Corporation") shall be held at such place, either within or without the Commonwealth of Virginia, as may from time to time be fixed by the Board of Directors of the Corporation (hereinafter called the "Board"). SECTION 2. ANNUAL MEETINGS. Except for the 1999 annual meeting of ---------------- shareholders which shall be held by written consent of the sole shareholder, the annual meeting of the shareholders of the Corporation for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held on the last Thursday in April in each year (or, if that day shall be a legal holiday, then on the next succeeding business day), or on such other day and/or in such other month as may be fixed by the Board, at such hour as may be specified in the notice thereof. SECTION 3. SPECIAL MEETINGS. A special meeting of the shareholders for ----------------- any purpose or purposes, unless otherwise provided by law or in the Articles of Incorporation of the Corporation as from time to time amended (hereinafter called the "Articles"), may be held at any time upon the call of the Board, the Chairman of the Board or the President. No other person shall be authorized or entitled to call a special meeting of the shareholders. SECTION 4. NOTICE OF MEETINGS. Except as otherwise provided by law or ------------------- the Articles, not less than ten nor more than sixty days' notice in writing of the place, day, hour and purpose or purposes of each meeting of the shareholders, whether annual or special, shall be given to each shareholder of record of the Corporation entitled to vote at such meeting, either by the delivery thereof to such shareholder personally or by the mailing thereof to such shareholder in a postage prepaid envelope addressed to such shareholder at his address as it appears on the stock transfer books of the Corporation. Notice of any meeting of shareholders shall not be required to be given to any shareholder who shall attend the meeting in person or by proxy, unless attendance is for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened, or who shall waive notice thereof in writing signed by the shareholder before, at or after such meeting. Notice of any adjourned meeting need not be given, except when expressly required by law. Any previously scheduled annual meeting of the shareholders may be postponed, and any special meeting of the shareholders may be canceled, by resolution of the Board of Directors upon public announcement given prior to the time previously scheduled for such annual or special meeting of the shareholders. SECTION 5. QUORUM. Shares representing a majority of the votes entitled to ------- be cast on a matter by all classes or series which are entitled to vote thereon and be counted together collectively, represented in person or by proxy at any meeting of the shareholders, shall constitute a quorum for the transaction of business thereat with respect to such matter, unless otherwise provided by law or the Articles. In the absence of a quorum at any such meeting or any adjournment or adjournments thereof, shares representing a majority of the votes cast on the matter of adjournment, either in person or by proxy, may adjourn such meeting from time to time until a quorum is obtained. At any such adjourned meeting at which a quorum has been obtained, any business may be transacted which might have been transacted at the meeting as originally called. SECTION 6. VOTING. Unless otherwise provided by law or the Articles, at ------- each meeting of the shareholders each shareholder entitled to vote at such meeting shall be entitled to one vote for each share of stock standing in his name on the books of the Corporation upon any date fixed as hereinafter provided, and may vote either in person or by proxy in writing. Unless demanded by a shareholder present in person or represented by proxy at any meeting of the shareholders and entitled to vote thereon or so directed by the chairman of the meeting, the vote on any matter need not be by ballot. On a vote by ballot, each ballot shall be signed by the shareholder voting or his proxy, and it shall show the number of shares voted. SECTION 7. JUDGES. One or more judges or inspectors of election for any ------- meeting of shareholders may be appointed by the chairman of such meeting, for the purpose of receiving and taking charge of proxies and ballots and deciding all questions as to the qualification of voters, the validity of proxies and ballots and the number of votes properly cast. SECTION 8. CONDUCT OF MEETING. The chairman of the meeting at each meeting ------------------- of shareholders shall have all the powers and authority vested in presiding officers by law or practice, without restriction, as well as the authority to conduct an orderly meeting and to impose reasonable limits on the amount of time taken up in remarks by any one shareholder. SECTION 9. BUSINESS PROPOSED BY A SHAREHOLDER. At any annual or special ----------------------------------- meeting of the shareholders, only such business shall be conducted as shall have been properly brought before such meeting. To be properly brought before an annual or special meeting of shareholders, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (iii) in the case of an annual meeting of shareholders, properly brought before the meeting by a shareholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a shareholder, the shareholder must have given 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 -2- registered or certified mail, postage prepaid, to the Secretary of the Corporation not later than 90 days nor more than 120 days before the anniversary of the date of the first mailing of the Corporation's proxy statement for the immediately preceding year's annual meeting; provided, however, that with respect to the annual meeting to be held in 2000, a shareholder's notice shall be deemed timely if delivered to the Secretary of the Corporation after November 15, 1999 but before December 14, 1999. In no event shall the public announcement of an adjournment or postponement of an annual meeting or the fact that an annual meeting is held before or after the anniversary of the preceding annual meeting commence a new time period for the giving of a shareholder's notice as described above. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting, including the complete text of any resolutions to be presented at the annual meeting with respect to such business, and the reasons for conducting such business at the annual meeting, (ii) the name and address of record of the shareholder proposing such business and any other person on whose behalf the proposal is being made, (iii) the class and number of shares of the Corporation that are beneficially owned by the shareholder and any other person on whose behalf the proposal is made, (iv) a representation that the shareholder is a holder of record of shares of the Corporation entitled to vote at such annual meeting and intends to appear in person or by proxy at the annual meeting to propose such business and (v) any material interest of the shareholder and any other person on whose behalf the proposal is made, in such business. In the event that a shareholder attempts to bring business before a meeting without complying with the procedures set forth in this Article 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 -3- postponement of an annual meeting or the fact that an annual meeting is held before or after the anniversary of the preceding annual meeting commence a new time period for the giving of a shareholder's notice as described above. Each such notice shall set forth: (a) the name and address of the shareholder who intends to make the nomination and any other person on whose behalf the nomination is being made, and of the person or persons to be nominated; (b) the class and number of shares of the Corporation that are owned by the shareholder and any other person on whose behalf the nomination is being made, (c) a representation that the shareholder is a holder of record of shares of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (d) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; and (e) such other information regarding each nominee proposed by such shareholder as would be required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required to be disclosed, pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated or intended to be nominated by the Board of Directors, and shall include a consent signed by each such nominee to being named in the Proxy Statement as a nominee and to serve as a director of the Corporation if so elected. In the event that a shareholder attempts to nominate any person without complying with the procedures set forth in this Article 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 nine 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 any increase or decrease by more than thirty percent of the number of directors of all classes immediately following the most recent election of directors by the shareholders may only be effected by the shareholders; provided, further, that no decrease in the number of directors shall shorten or terminate the term of any incumbent director. No director need be a shareholder. SECTION 2. COMPENSATION. Each director, in consideration of his serving as ------------- such, shall be entitled to receive from the Corporation such amount per annum or such fees for attendance at Board and Committee meetings, or both, in cash or other property, including securities of the Corporation, as the Board shall from time to time determine, together with reimbursements for the reasonable expenses incurred by him in connection -4- 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, --------------------- as soon as conveniently may be, the newly constituted Board shall meet for the purposes of organization. At such organization meeting, the newly constituted Board shall elect officers of the Corporation and transact such other business as shall come before the meeting. Notice of organization meetings of the Board need not be given. Any organization meeting may be held at any other time or place which shall be specified in a notice given as hereinafter provided for special meetings of the Board, or in a waiver of notice thereof signed by all the directors. SECTION 5. REGULAR MEETINGS. Regular meetings of the Board may be held at ----------------- such time and place as may from time to time be specified in a resolution adopted by the Board then in effect; and, unless otherwise required by such resolution, or by law, notice of any such regular meeting need not be given. SECTION 6. SPECIAL MEETINGS. Special meetings of the Board shall be held ----------------- whenever called by the Chief Executive Officer, or by the Secretary at the request of any three directors. Notice of a special meeting shall be mailed to each director, addressed to him at his residence or usual place of business, not later than the second day before the day on which such meeting is to be held, or shall be sent addressed to him at such place by telegraph, cable or wireless, or be delivered personally or by telephone, not later than the day before the day on which such meeting is to be held. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in the notice of such meeting, unless required by the Articles. 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 -5- been given or regardless of the giving of any notice or the adoption of any resolution in reference thereto, if every member of the Board shall be present thereat. Except as otherwise provided by law or these Bylaws, waivers of notice of any meeting of the Board need not contain any statement of the purpose of the meeting. SECTION 9. TELEPHONE MEETINGS. Members of the Board or any committee may ------------------- participate in a meeting of the Board or such committee by means of a conference telephone or other means of communications whereby all directors participating may simultaneously hear each other during the meeting, and participation by such means shall constitute presence in person at such meeting. SECTION 10. ACTIONS WITHOUT MEETINGS. Any action that may be taken at a ------------------------- meeting of the Board or of a committee may be taken without a meeting if a consent in writing, setting forth the action, shall be signed, either before or after such action, by all of the directors or all of the members of the committee, as the case may be. Such consent shall have the same force and effect as a unanimous vote. ARTICLE III. COMMITTEES. SECTION 1. EXECUTIVE AND FINANCE COMMITTEE. The Board may, by resolution -------------------------------- or resolutions adopted by a majority of the number of directors fixed by these Bylaws, appoint two or more directors to constitute an Executive and Finance Committee, each member of which shall serve as such during the pleasure of the Board, and may designate for such committee a chairman, who shall continue as such during the pleasure of the Board. All completed action by the Executive and Finance Committee shall be reported to the Board at its meeting next succeeding such action or at its meeting held in the month following the taking of such action, and shall be subject to revision or alteration by the Board; provided, that no acts or rights of third parties shall be affected by any such revision or alteration. 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 -6- Finance Committee shall deem best for the interests of the Corporation, in all cases in which specific directions shall not have been given by the Board. SECTION 2. OTHER COMMITTEES. To the extent permitted by law, the Board may ----------------- from time to time by resolution adopted by a majority of the number of directors fixed by these Bylaws create such other committees of directors, officers, employees or other persons designated by it as the Board shall deem advisable and with such limited authority, functions and duties as the Board shall by resolution prescribe. The Board shall have the power to change the members of any such committee at any time, to fill vacancies, and to discharge any such committee, either with or without cause, at any time. ARTICLE IV. OFFICERS. SECTION 1. NUMBER, TERM, ELECTION. The officers of the Corporation shall ----------------------- be a Chief Executive Officer, a Chairman of the Board, a President, one or more Vice Presidents, a Treasurer, a Controller and a Secretary. The Board may appoint such other officers and such assistant officers and agents with such powers and duties as the Board may find necessary or convenient to carry on the business of the Corporation. Such officers and assistant officers shall serve until their successors shall be chosen, or as otherwise provided in these Bylaws. Any two or more offices may be held by the same person. SECTION 2. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall, ------------------------ subject to the control of the Board and the Executive and Finance Committee, have full authority and responsibility for directing the conduct of the business, affairs and operations of the Corporation. In addition to acting as Chief Executive Officer of the Corporation, he or she shall perform such other duties and exercise such other powers as may from time to time be prescribed by the Board and shall see that all orders and resolutions of the Board and the Executive and Finance Committee are carried into effect. In the event of the inability of the Chief Executive Officer to act, the Board will designate an officer of the Corporation to perform the duties of that office. 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 -7- Executive Officer or any officer to whom the Chief Executive Officer may have delegated such authority. SECTION 6. TREASURER. The Treasurer shall have the general care and ---------- custody of the funds and securities of the Corporation. He or she shall perform such other duties and exercise such other powers as may from time to time be prescribed by the Board, the Chief Executive Officer or any officer to whom the Chief Executive Officer may have delegated such authority. If the Board shall so determine, he or she shall give a bond for the faithful performance of his or her duties, in such sum as the Board may determine to be proper, the expense of which shall be borne by the Corporation. To such extent as the Board shall deem proper, the duties of the Treasurer may be performed by one or more assistants, to be appointed by the Board. SECTION 7. CONTROLLER. The Controller shall be the accounting officer of ----------- the Corporation. He or she shall keep full and accurate accounts of all assets, liabilities, receipts and disbursements and other transactions of the Corporation and cause regular audits of the books and records of the Corporation to be made. He or she shall also perform such other duties and exercise such other powers as may from time to time be prescribed by the Board, the Chief Executive Officer or any officer to whom the Chief Executive Officer may have delegated such authority. If the Board shall so determine, he or she shall give a bond for the faithful performance of his duties, in such sum as the Board may determine to be proper, the expense of which shall be borne by the Corporation. To such extent as the Board shall deem proper, the duties of the Controller may be performed by one or more assistants, to be appointed by the Board. SECTION 8. SECRETARY. The Secretary shall keep the minutes of meetings of ---------- shareholders, of the Board, and, when requested, of Committees of the Board; and he or she shall attend to the giving and serving of notices of all meetings thereof. He or she shall keep or cause to be kept such stock and other books, showing the names of the shareholders of the Corporation, and all other particulars regarding them, as may be required by law. He or she shall also perform such other duties and exercise such other powers as may from time to time be prescribed by the Board, the Chief Executive Officer or any officer to whom the Chief Executive Officer may have delegated such authority. To such extent as the Board shall deem proper, the duties of the Secretary may be performed by one or more assistants, to be appointed by the Board. 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. -8- SECTION 2. RESIGNATION. Any director, officer or assistant officer of the ------------ Corporation may resign as such at any time by giving written notice of his resignation to the Board, the Chief Executive Officer or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein or, if no time is specified therein, at the time of delivery thereof, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 3. VACANCIES. Any vacancy in the office of any officer or ---------- assistant officer caused by death, resignation, removal or any other cause, may be filled by the Board for the unexpired portion of the term. ARTICLE VI. CONTRACTS, LOANS, CHECKS, DRAFTS, DEPOSITS, ETC. SECTION 1. EXECUTION OF CONTRACTS. Except as otherwise provided by law or ----------------------- by these Bylaws, the Board (i) may authorize any officer, employee or agent of the Corporation to execute and deliver any contract, agreement or other instrument in writing in the name and on behalf of the Corporation, and (ii) may authorize any officer, employee or agent of the Corporation so authorized by the Board to delegate such authority by written instrument to other officers, employees or agents of the Corporation. Any such authorization by the Board may be general or specific and shall be subject to such limitations and restrictions as may be imposed by the Board. Any such delegation of authority by an officer, employee or agent may be general or specific, may authorize re-delegation, and shall be subject to such limitations and restrictions as may be imposed in the written instrument of delegation by the person making such delegation. SECTION 2. LOANS. No loans shall be contracted on behalf of the ------ Corporation and no negotiable paper shall be issued in its name unless authorized by the Board. When authorized by the Board, any officer, employee or agent of the Corporation may effect loans and advances at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other certificates or evidences of indebtedness of the Corporation and when so authorized may pledge, hypothecate or 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. -9- SECTION 5. VOTING OF SECURITIES. Unless otherwise provided by the Board, --------------------- the Chief Executive Officer may from time to time appoint an attorney or attorneys, or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as the holder of stock or other securities in any other corporation, any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation, or to consent in writing, in the name of the Corporation as such holder, to any action by such other corporation, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as such officer may deem necessary or proper in the premises. ARTICLE VII. CAPITAL STOCK. SECTION 1. SHARES. Shares of the Corporation may but need not be ------- represented by certificates. When shares are represented by certificates, the Corporation shall issue such certificates in such form as shall be required by the Virginia Stock Corporation Act (the "VSCA") and as determined by the Board of Directors, to every shareholder for the fully paid shares owned by such shareholder. Each certificate shall be signed by, or shall bear the facsimile signature of, the Chairman of the Board, the President or a Vice President and the Secretary or an Assistant Secretary of the Corporation and may bear the corporate seal of the Corporation or its facsimile. All certificates for the Corporation's shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom shares (whether or not represented by a certificate) are issued, with the number of shares and date of issue, shall be entered on the share transfer books of the Corporation. Such information may be stored or retained on discs, tapes, cards or any other approved storage device relating to data 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 -10- shares held by such shareholder. Shares of stock of the Corporation shall be transferable on the stock books of the Corporation by the holder in person or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or the transfer agent, but, except as hereinafter provided in the case of loss, destruction or mutilation of certificates, no transfer of stock shall be entered until the previous certificate, if any, given for the same shall have been surrendered and canceled. Transfer of shares of the Corporation represented by certificates shall be made on the stock transfer books of the Corporation only upon surrender of the certificates for the shares sought to be transferred by the holder of record thereof or by such holder's duly authorized agent, transferee or legal representative, who shall furnish proper evidence of authority to transfer with the Secretary of the Corporation or its designated transfer agent or other agent. All certificates surrendered for transfer shall be canceled before new certificates for the transferred shares shall be issued. Except as otherwise provided by law, no transfer of shares shall be valid as against the Corporation, its shareholders or creditors, for any purpose, until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred. SECTION 3. HOLDER OF RECORD. Except as otherwise required by the VSCA, the ----------------- Corporation may treat the person in whose name shares of stock of the Corporation (whether or not represented by a certificate) stand of record on its books or the books of any transfer agent or other agent designated by the Board of Directors as the absolute owner of the shares and the person exclusively entitled to receive notification and distributions, to vote, and to otherwise exercise the rights, powers and privileges of ownership of such shares. SECTION 4. RECORD DATE. For the purpose of determining shareholders ------------ entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than seventy days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof unless the Board fixes a new record date, which it 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 -11- 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. -12- EMERGENCY BYLAWS. SECTION 1. DEFINITIONS. As used in these Emergency Bylaws, ------------ (a) the term "period of emergency" shall mean any period during which a quorum of the Board cannot readily be assembled because of some catastrophic event. (b) the term "incapacitated" shall mean that the individual to whom such term is applied shall not have been determined to be dead but shall be missing or unable to discharge the responsibilities of his office; and (c) the term "senior officer" shall mean the Chairman of the Board, the Chief Executive Officer, the President, any corporate Vice President, the Treasurer, the Controller and the Secretary, and any other person who may have been so designated by the Board before the emergency. SECTION 2. APPLICABILITY. These Emergency Bylaws, as from time to time -------------- amended, shall be operative only during any period of emergency. To the extent not inconsistent with these Emergency Bylaws, all provisions of the regular Bylaws of the Corporation shall remain in effect during any period of emergency. No officer, director or employee shall be liable for actions taken in good faith in accordance with these Emergency Bylaws. SECTION 3. BOARD OF DIRECTORS. (a) A meeting of the Board may be called by ------------------- any director or senior officer of the Corporation. Notice of any meeting of the Board need be given only to such of the directors as it may be feasible to reach at the time and by such means as may be feasible at the time, including publication or radio, and at a time less than twenty-four hours before the meeting if deemed necessary by the person giving notice. (b) At any meeting of the Board, three directors in attendance shall constitute a quorum. Any act of a majority of the directors present at a meeting at which a quorum shall be present shall be the act of the Board. If less than three directors should be present at a meeting of the Board, any senior officer of the Corporation in attendance at such meeting shall serve as a director for such meeting, selected in order of rank and within the same rank in order of seniority. (c) In addition to the Board's powers under the regular Bylaws of the Corporation to fill vacancies on the Board, the Board may elect any individual as a director to replace any director who may be incapacitated and to serve until the latter ceases to be incapacitated or until the termination of the period of emergency, whichever first occurs. In considering officers of the Corporation for election to the Board, the rank and seniority of individual officers shall not be pertinent. (d) The Board, during as well as before any such emergency, may change the principal office or designate several alternative offices or authorize the officers to do so. -13- 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. -14- EX-4.1 5 SPECIMEN COMMON SHARE CERT. Exhibit 4.1 NUMBER AC [LOGO] [CORPORATE SEAL] [ART APPEARS HERE] COMMON STOCK SHARES PAR VALUE ONE DOLLAR PER SHARE ($1) ARCH CHEMICALS, INC. INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF VIRGINIA THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK AND NEW JERSEY SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP 03937R 10 2 THIS CERTIFIES THAT IS THE OWNER OF FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK OF ARCH CHEMICALS, INC., transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Corporation's Articles of Incorporation and Bylaws, both as amended, to all of which each holder by acceptance hereof assents. This Certificate is not valid unless countersigned by a Transfer Agent and registered by a Registrar. Witness the facsimile signatures of the Corporation's proper officers and a facsimile of its corporate seal. Dated COUNTERSIGNED AND REGISTERED CHASEMELLON SHAREHOLDER SERVICES, L.L.C. TRANSFER AGENT AND REGISTRAR /s/ Sarah A. O'Connor /s/ Michael E. Campbell BY SECRETARY CHAIRMAN OF THE BOARD AUTHORIZED SIGNATURE 2 EXPLANATION OF ABBREVIATIONS The following abbreviations when used in the form of ownership on the face of this certificate shall be construed as though they were written out in full according to applicable laws or regulations. Abbreviations in addition to those appearing below, may be used.
Phrase Abbreviation Equivalent Phrase Abbreviation Equivalent JT TEN As joint tenants, TEN BY ENT As tenants by the with right of entireties survivorship and not as tenants in common TEN IN COM As tenants in common UNIF GIFT MIN ACT Uniform Gifts to Minors Act Word Word Word Abbreviation Equivalent Abbreviation Equivalent Abbreviation Equivalent ADM Admistrator(s) EST Estate, Of PAR Paragraph Administratrix EX estate of PL Public Law Executor(s), Executrix AGMT Agreement FBO For the TR (As) benefit of trustee(s) for, of ART Article FDN Foundation U Under CH Chapter GDN Guardian(s) UA Under agreement CUST Custodian for GDNSHP Guardianship UW Under will of, Of will of, Under last will & testament DEC Declaration MIN Minor(s)
3 ARCH CHEMICALS, INC. A copy of the Articles of Incorporation, as amended, of the Corporation containing a full statement of the designations, preferences, limitations and relative rights of the shares of Common Stock and Preferred Stock, and the variations in the relative rights, preferences and limitations between the shares of each series of Preferred Stock so far as the same have been fixed and determined, and of the authority of the Board of Directors to fix and determine the relative rights, preferences and limitations of subsequent series, may be obtained, without charge, from the Transfer Agent or the office of the Secretary of the Corporation, upon written request by a Shareholder. - -------------------------------------------------------------------------------- ASSIGNMENT FORM For value received hereby sell, assign and transfer shares of the --------- -------- (I or we) (amount) capital stock represented by this certificate to PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ----------------------------------------- [ ] (Print full name and address of Assignee) ---------------------------------------------- [ ] [ ] [ ] [ ] Assignee, - --------------------------------------- zip code and do irrevocably constitute and appoint ___________________________as Attorney (Leave blank or fill in as explained in Notice below) to transfer the said Stock on the books of the Corporation with full power of substitution. Dated ----------------------- ------------------------------------- (Sign here exactly as name(s) is shown on the face of this certificate without any change or alteration whatever.) IMPORTANT NOTICE: When you sign your name to this Assignment Form without filling in the name of your "Assignee" or "Attorney", this stock certificate becomes fully negotiable, similar to a check endorsed in blank. Therefore, to safeguard a signed certificate, it is recommended that you either (i) fill in the name of the new owner in the "Assignee" blank, or (ii) if you are sending the signed certificate to your bank or broker, fill in the name of the bank or broker in the "Attorney" blank. Alternatively, instead of using this Assignment Form, you may sign a separate "stock power" form and then mail the Assignment Form, you may sign a separate "stock power" form and then mail the unsigned stock certificate and the signed "stock power" in separate envelopes. For added protection, use certified or registered mail for a stock certificate. Keep this certificate in a safe place. If it is lost, stolen or destroyed, the Corporation will require a bond of indemnity as a condition to the issuance of a replacement certificate. This certificate also evidences and entities the holder hereof to certain Rights as set forth in a Rights Agreement, as it may be amended from time to time (the "Rights Agreement"), between Arch Chemicals, Inc. (the "Company") and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights Agent"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Rights Agent will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Rights beneficially owned by Acquiring Persons or their Affiliates or Associates (as such terms are defined in the Rights Agreement) and by any subsequent holder of such Rights are null and void and nontransferable. Signature(s) Guaranteed: - ----------------------------------------- THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCK- BROKERS, SAVINGS AND LOAN\ ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO SEC RULE 17Ad 15. EX-4.4 6 RIGHTS AGREEMENT EXHIBIT 4.4 RIGHTS AGREEMENT dated as of [ ], 1999, between ARCH CHEMICALS, INC., a Virginia corporation (the "Company"), and CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Rights Agent (the "Rights Agent"). The Board of Directors of the Company has authorized and declared a dividend of one Right (as hereinafter defined) for each share of Common Stock, par value $1 per share, of the Company (the "Common Stock") outstanding at the Close of Business (as hereinafter defined) on February 5, 1999 (the "Record Date"), and has authorized the issuance of one Right (as such number may hereafter be adjusted pursuant to the provisions of this Rights Agreement) with respect to each share of Common Stock that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date or the Expiration Date (as such terms are hereinafter defined); provided, however, -------- ------- that Rights may be issued with respect to shares of Common Stock that shall become outstanding after the Distribution Date and prior to the earlier of the Redemption Date or the Expiration Date in accordance with the provisions of Section 23. Each Right shall initially represent the right to purchase one- thousandth (1/1,000) of a share of Series A Participating Cumulative Preferred Stock, par value $1 per share, of the Company (the "Preferred Shares"), having the powers, rights and preferences set forth in the Articles attached as Exhibit A. Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: SECTION 1. Certain Definitions. For purposes of this Rights -------------------- Agreement, the following terms have the meanings indicated: "Acquiring Person" shall mean any Person who or which, alone or ---------------- together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of more than 15% of the Common Shares then outstanding but shall not include (a) (i) the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any of its Subsidiaries or of Olin Corporation, or any Person holding Common Shares for or pursuant to the terms of any such employee benefit plan or (ii) at any date prior to February 9, 1999, Olin Corporation or (b) any such Person who has become and is such a Beneficial Owner solely because (i) of a change in the aggregate number of Common Shares 2 outstanding since the last date on which such Person acquired Beneficial Ownership of any Common Shares or (ii) it acquired such Beneficial Ownership in the good faith belief that such acquisition would not (A) cause such Beneficial Ownership to exceed 15% of the Common Shares then outstanding and such Person relied in good faith in computing the percentage of its Beneficial Ownership on publicly filed reports or documents of the Company which are inaccurate or out- of-date or (B) otherwise cause a Distribution Date or the adjustment provided for in Section 11(a) to occur. Notwithstanding clause (b)(ii) of the prior sentence, if any Person that is not an Acquiring Person due to such clause (b)(ii) does not reduce its percentage of Beneficial Ownership of Common Shares to 15% or less by the Close of Business on the fifth Business Day after notice from the Company (the date of notice being the first day) that such Person's Beneficial Ownership of Common Shares so exceeds 15%, such Person shall, at the end of such five Business Day period, become an Acquiring Person (and such clause (b)(ii) shall no longer apply to such Person). For purposes of this definition, the determination whether any Person acted in "good faith" shall be conclusively determined by the Board of Directors of the Company, acting by a vote of those directors of the Company whose approval would be required to redeem the Rights under Section 24. "Affiliate" and "Associate", when used with reference to any Person, --------- --------- shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Rights Agreement. A Person shall be deemed the "Beneficial Owner" of, and shall be ---------------- deemed to "beneficially own", and shall be deemed to have "Beneficial Ownership" ---------------- -------------------- of, any securities: (a) which such Person or any of such Person's Affiliates or Associates is deemed to "beneficially own" within the meaning of Rule 13d-3 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Rights Agreement; (b) which such Person or any of such Person's Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (written or oral), or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed -------- ------- the Beneficial Owner of, or to beneficially 3 own, or to have Beneficial Ownership of, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange thereunder, or (ii) the right to vote pursuant to any agreement, arrangement or understanding (written or oral); provided, however, that a Person shall not be deemed the Beneficial Owner --------- ------- of, or to beneficially own, any security if (A) the agreement, arrangement or understanding (written or oral) to vote such security arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Exchange Act and (B) the beneficial ownership of such security is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or (c) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (written or oral) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in clause (b)(ii) of this definition) or disposing of any securities of the Company. Notwithstanding the foregoing, nothing contained in this definition shall cause a Person ordinarily engaged in business as an underwriter of securities to be the "Beneficial Owner" of, or to "beneficially own", any securities acquired in a bona fide firm commitment underwriting pursuant to an underwriting agreement with the Company. "Articles" shall mean the Amended and Restated Articles of -------- Incorporation of the Company which, among other things, designates and establishes the Series A Participating Cumulative Preferred Stock and sets forth the preferences, limitations and relative rights of such series of Preferred Stock of the Company, a copy of which is attached as Exhibit A. "Book Value", when used with reference to Common Shares issued by any ---------- Person, shall mean the amount of equity of such Person applicable to each Common Share, determined (a) in accordance with generally accepted accounting principles in effect on the date as of which such Book Value is to be determined, (b) using all the consolidated assets 4 and all the consolidated liabilities of such Person on the date as of which such Book Value is to be determined, except that no value shall be included in such assets for goodwill arising from consummation of a business combination, and (c) after giving effect to (i) the exercise of all rights, options and warrants to purchase such Common Shares (other than the Rights), and the conversion of all securities convertible into such Common Shares, at an exercise or conversion price, per Common Share, which is less than such Book Value before giving effect to such exercise or conversion (whether or not exercisability or convertibility is conditioned upon occurrence of a future event), (ii) all dividends and other distributions on the capital stock of such Person declared prior to the date as of which such Book Value is to be determined and to be paid or made after such date, and (iii) any other agreement, arrangement or understanding (written or oral), or transaction or other action prior to the date as of which such Book Value is to be determined which would have the effect of thereafter reducing such Book Value. "Business Combination" shall have the meaning set forth in Section -------------------- 11(c)(i). "Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday ------------ and Friday which is not a day on which banking institutions in the Borough of Manhattan, the City of New York, are authorized or obligated by law or executive order to close. "Close of Business" on any given date shall mean 5:00 p.m., New York ----------------- City time, on such date; provided, however, that, if such date is not a Business -------- -------- Day, "Close of Business" shall mean 5:00 p.m., New York City time, on the next succeeding Business Day. "Common Shares", when used with reference to the Company prior to a ------------- Business Combination, shall mean the shares of Common Stock of the Company or any other shares of capital stock of the Company into which the Common Stock shall be reclassified or changed. "Common Shares", when used with reference to any Person (other than the Company prior to a Business Combination), shall mean shares of capital stock of such Person (if such Person is a corporation) of any class or series, or units of equity interests in such Person (if such Person is not a corporation) of any class or series, the terms of which do not limit (as a maximum amount and not merely in proportional terms) the amount of dividends or income payable or distributable on such class or series or the amount of assets distributable on such class or series upon 5 any voluntary or involuntary liquidation, dissolution or winding up of such Person and do not provide that such class or series is subject to redemption at the option of such Person, or any shares of capital stock or units of equity interests into which the foregoing shall be reclassified or changed; provided, -------- however, that, if at any time there shall be more than one such class or series - ------- of capital stock or equity interests of such Person, "Common Shares" of such Person shall include all such classes and series substantially in the proportion of the total number of shares or other units of each such class or series outstanding at such time. "Common Stock" shall have the meaning set forth in the introductory ------------ paragraph of this Rights Agreement. "Company" shall have the meaning set forth in the heading of this ------- Rights Agreement; provided, however, that if there is a Business Combination, -------- ------- "Company" shall have the meaning set forth in Section 11(c)(iii). The term "control" with respect to any Person shall mean the power to ------- direct the management and policies of such Person, directly or indirectly, by or through stock ownership, agency or otherwise, or pursuant to or in connection with an agreement, arrangement or understanding (written or oral) with one or more other Persons by or through stock ownership, agency or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing. "Distribution Date" shall have the meaning set forth in Section 3(b). ----------------- "Exchange Act" shall mean the Securities Exchange Act of 1934, as in ------------ effect on the date in question, unless otherwise specifically provided. "Exchange Consideration" shall have the meaning set forth in Section ---------------------- 11(b)(i). "Expiration Date" shall have the meaning set forth in Section 7(a). --------------- "Major Part", when used with reference to the assets of the Company ---------- and its Subsidiaries as of any date, shall mean assets (a) having a fair market value aggregating 50% or more of the total fair market value of all the assets of the Company and its Subsidiaries (taken as a whole) as of the date in question, (b) accounting for 50% or more of the total value (net of depreciation and amortization) of all 6 the assets of the Company and its Subsidiaries (taken as a whole) as would be shown on a consolidated or combined balance sheet of the Company and its Subsidiaries as of the date in question, prepared in accordance with generally accepted accounting principles then in effect, or (c) accounting for 50% or more of the total amount of earnings before interest, taxes, depreciation and amortization or of the revenues of the Company and its Subsidiaries (taken as a whole) as would be shown on, or derived from, a consolidated or combined statement of income or operations of the Company and its Subsidiaries for the period of 12 months ending on the last day of the Company's monthly accounting period next preceding the date in question, prepared in accordance with generally accepted accounting principles then in effect. "Market Value", when used with reference to Common Shares on any date, ------------ shall be deemed to be the average of the daily closing prices, per share, of such Common Shares for the period which is the shorter of (a) 30 consecutive Trading Days immediately prior to the date in question or (b) the number of consecutive Trading Days beginning on the Trading Day immediately after the date of the first public announcement of the event requiring a determination of the Market Value and ending on the Trading Day immediately prior to the record date of such event; provided, however, that, in the event that the Market Value of -------- ------- such Common Shares is to be determined in whole or in part during a period following the announcement by the issuer of such Common Shares of any action of the type described in Section 12(a) that would require an adjustment thereunder, then, and in each such case, the Market Value of such Common Shares shall be appropriately adjusted to reflect the effect of such action on the market price of such Common Shares. The closing price for each Trading Day shall be the closing price quoted on the principal United States securities exchange registered under the Exchange Act (or any recognized foreign stock exchange) on which such securities are listed, or, if such securities are not listed on any such exchange, the average of the closing bid and asked quotations with respect to a share of such securities on any National Association of Securities Dealers, Inc. quotations system, or if no such quotations are available, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such securities selected by the Board of Directors of the Company. If on any such Trading Day no market maker is making a market in such securities, the closing price of such securities on such Trading Day shall be deemed to be the fair value of such securities as determined in good faith by the Board of Directors of the Company (whose determination shall be 7 described in a statement filed with the Rights Agent and shall be binding on the Rights Agent, the holders of Rights and all other Persons); provided, however, -------- ------- that for the purpose of determining the closing price of the Preferred Shares for any Trading Day on which there is no such market maker for the Preferred Shares the closing price on such Trading Day shall be deemed to be the Formula Number (as defined in the Articles) times the closing price of the Common Shares of the Company on such Trading Day. "Person" shall mean an individual, corporation, partnership, joint ------ venture, association, trust, unincorporated organization or other entity. "Preferred Shares" shall have the meaning set forth in the ---------------- introductory paragraph of this Rights Agreement. Any reference in this Rights Agreement to Preferred Shares shall be deemed to include any authorized fraction of a Preferred Share, unless the context otherwise requires. "Principal Party" shall mean the Surviving Person in a Business --------------- Combination; provided, however, that, if such Surviving Person is a direct or -------- ------- indirect Subsidiary of any other Person, "Principal Party" shall mean the Person which is the ultimate parent of such Surviving Person and which is not itself a Subsidiary of another Person. In the event ultimate control of such Surviving Person is shared by two or more Persons, "Principal Party" shall mean that Person that is immediately controlled by such two or more Persons. "Purchase Price" with respect to each Right shall mean $125, as such -------------- amount may from time to time be adjusted as provided herein. All references herein to the Purchase Price shall mean the Purchase Price as in effect at the time in question. "Record Date" shall have the meaning set forth in the introductory ----------- paragraph of this Rights Agreement. "Redemption Date" shall have the meaning set forth in Section 24(a). --------------- "Redemption Price" with respect to each Right shall mean $.01, as such ---------------- amount may from time to time be adjusted in accordance with Section 12. All references herein to the Redemption Price shall mean the Redemption Price as in effect at the time in question. 8 "Registered Common Shares" shall mean Common Shares which are, as of ------------------------ the date of consummation of a Business Combination, and have continuously been for the 12 months immediately preceding such date, registered under Section 12 of the Exchange Act. "Right Certificate" shall mean a certificate evidencing a Right in ----------------- substantially the form attached as Exhibit B. "Rights" shall mean the rights to purchase Preferred Shares (or other ------ securities) as provided in this Rights Agreement. "Securities Act" shall mean the Securities Act of 1933, as in effect -------------- on the date in question, unless otherwise specifically provided. "Subsidiary" shall mean a Person, at least a majority of the total ---------- outstanding voting power (being the power under ordinary circumstances (and not merely upon the happening of a contingency) to vote in the election of directors of such Person (if such Person is a corporation) or to participate in the management and control of such Person (if such Person is not a corporation)) of which is owned, directly or indirectly, by another Person or by one or more other Subsidiaries of such other Person or by such other Person and one or more other Subsidiaries of such other Person. "Surviving Person" shall mean (a) the Person which is the continuing ---------------- or surviving Person in a consolidation or merger specified in Section 11(c)(i)(A) or 11(c)(i)(B) or (b) the Person to which the Major Part of the assets of the Company and its Subsidiaries is sold, leased, exchanged or otherwise transferred or disposed of in a transaction specified in Section 11(c)(i)(C); provided, however, that, if the Major Part of the assets of the -------- ------- Company and its Subsidiaries is sold, leased, exchanged or otherwise transferred or disposed of in one or more related transactions specified in Section 11(c)(i)(C) to more than one Person, the "Surviving Person" in such case shall mean the Person that acquired assets of the Company and/or its Subsidiaries with the greatest fair market value in such transaction or transactions. "Trading Day" shall mean a day on which the principal national ----------- securities exchange (or principal recognized foreign stock exchange, as the case may be) on which any securities or Rights, as the case may be, are listed or admitted to trading is open for the transaction of 9 business or, if the securities or Rights in question are not listed or admitted to trading on any national securities exchange (or recognized foreign stock exchange, as the case may be), a Business Day. SECTION 2. Appointment of Rights Agent. The Company hereby appoints ---------------------------- the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint one or more co-Rights Agents as it may deem necessary or desirable upon notice to the Rights Agent (the term "Rights Agent" being used herein to refer, collectively, to the Rights Agent together with any such co-Rights Agents). In the event the Company appoints one or more co-Rights Agents, the respective duties of the Rights Agent and any co-Rights Agents shall be as the Company shall determine. SECTION 3. Issue of Rights and Right Certificates. (a) One Right --------------------------------------- shall be associated with each Common Share outstanding on the Record Date, each additional Common Share that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date or the Expiration Date and each additional Common Share with which Rights are issued after the Distribution Date but prior to the earlier of the Redemption Date or the Expiration Date as provided in Section 23; provided, however, that, if the --------- ------- number of outstanding Rights are combined into a smaller number of outstanding Rights pursuant to Section 12(a), the appropriate fractional Right determined pursuant to such Section shall thereafter be associated with each such Common Share. (b) Until the earlier of (i) such time as the Company learns that a Person has become an Acquiring Person or (ii) the Close of Business on such date, if any, as may be designated by the Board of Directors of the Company following the commencement of, or first public disclosure of an intent to commence, a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any of its Subsidiaries, or any Person holding Common Shares for or pursuant to the terms of any such employee benefit plan) for outstanding Common Shares, if upon consummation of such tender or exchange offer such Person could be the Beneficial Owner of more than 15% of the outstanding Common Shares (the Close of Business on the earlier of such dates being the "Distribution Date"), (x) the Rights will be evidenced by the certificates for Common Shares registered in the names of the holders thereof and not by separate Right Certificates and (y) the Rights, including the right to 10 receive Right Certificates, will be transferable only in connection with the transfer of Common Shares. As soon as practicable after the Distribution Date, the Rights Agent will send, by first-class, postage-prepaid mail, to each record holder of Common Shares as of the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate evidencing one whole Right for each Common Share (or for the number of Common Shares with which one whole Right is then associated if the number of Rights per Common Share held by such record holder has been adjusted in accordance with the proviso in Section 3(a)). If the number of Rights associated with each Common Share has been adjusted in accordance with the proviso in Section 3(a), at the time of distribution of the Right Certificates the Company may make any necessary and appropriate rounding adjustments so that Right Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Right in accordance with Section 15(a). As of and after the Distribution Date, the Rights will be evidenced solely by such Right Certificates. (c) With respect to any certificate for Common Shares, until the earliest of the Distribution Date, the Redemption Date or the Expiration Date, the Rights associated with the Common Shares represented by any such certificate shall be evidenced by such certificate alone, the registered holders of the Common Shares shall also be the registered holders of the associated Rights and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. (d) Certificates issued for Common Shares after the Record Date (including, without limitation, upon transfer or exchange of outstanding Common Shares), but prior to the earliest of the Distribution Date, the Redemption Date or the Expiration Date, shall have printed on, written on or otherwise affixed to them the following legend: This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement dated as of January [ ], 1999, as it may be amended from time to time (the "Rights Agreement"), between Arch (the "Company") and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights Agent"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances, as set forth 11 in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Rights Agent will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Rights beneficially owned by Acquiring Persons or their Affiliates or Associates (as such terms are defined in the Rights Agreement) and by any subsequent holder of such Rights are null and void and nontransferable. Notwithstanding this paragraph (d), the omission of a legend shall not affect the enforceability of any part of this Rights Agreement or the rights of any holder of Rights. SECTION 4. Form of Right Certificates. The Right Certificates (and --------------------------- the form of election to purchase and form of assignment to be printed on the reverse side thereof) shall be in substantially the form set forth as Exhibit B and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Rights Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Sections 7, 11 and 23, the Right Certificates, whenever issued, shall be dated as of the Distribution Date, and on their face shall entitle the holders thereof to purchase such number of Preferred Shares as shall be set forth therein for the Purchase Price set forth therein, subject to adjustment from time to time as herein provided. SECTION 5. Execution, Countersignature and Registration. (a) The --------------------------------------------- Right Certificates shall be executed on behalf of the Company by the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Treasurer or a Vice President (whether preceded by any additional title) of the Company, either manually or by facsimile signature, and have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Secretary, an Assistant Secretary or a Vice President (whether preceded by any additional title, provided that such Vice President shall not have also executed the Right Certificates) of the Company, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid or obligatory for any purpose unless so 12 countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such an officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates may nevertheless be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be such an officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of execution of this Rights Agreement any such person was not such an officer of the Company. (b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office in New York, New York, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced by each of the Right Certificates, the certificate number of each of the Right Certificates and the date of each of the Right Certificates. SECTION 6. Transfer, Split-Up, Combination and Exchange of Right ----------------------------------------------------- Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates; - ---------------------------------------------------------------------- Uncertificated Rights. (a) Subject to the provisions of Sections 7(e) and 15, - ---------------------- at any time after the Distribution Date, and at or prior to the Close of Business on the earlier of the Redemption Date or the Expiration Date, any Right Certificate or Right Certificates may be transferred, split-up, combined or exchanged for another Right Certificate or Right Certificates representing, in the aggregate, the same number of Rights as the Right Certificate or Right Certificates surrendered then represented. Any registered holder desiring to transfer, split-up, combine or exchange any Right Certificate shall make such request in writing delivered to the Rights Agent and shall surrender the Right Certificate or Right Certificates to be transferred, split-up, combined or exchanged at the principal office of the Rights Agent; provided, however, that -------- ------- neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any Right Certificate surrendered for transfer until the registered holder shall have completed and signed the certification contained in the form of assignment on the reverse side of such Right Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner 13 (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Sections 7(e) and 15, countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split-up, combination or exchange of Right Certificates. (b) Upon receipt by the Company or the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a valid Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancelation of the Right Certificate if mutilated, the Company will make a new Right Certificate of like tenor and deliver such new Right Certificate to the Rights Agent for delivery to the registered owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. (c) Notwithstanding any other provision hereof, the Company and the Rights Agent may amend this Rights Agreement to provide for uncertificated Rights in addition to or in place of Rights evidenced by Right Certificates. SECTION 7. Exercise of Rights; Expiration Date of Rights. (a) ---------------------------------------------- Subject to Section 7(e) and except as otherwise provided herein (including Section 11), each Right shall entitle the registered holder thereof, upon exercise thereof as provided herein, to purchase for the Purchase Price, at any time after the Distribution Date and at or prior to the earlier of (i) the Close of Business on the 10th anniversary of the date of this Rights Agreement (the Close of Business on such date being the "Expiration Date") or (ii) the Redemption Date, one-thousandth (1/1,000) of a Preferred Share, subject to adjustment from time to time as provided in Sections 11 and 12. (b) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date, upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the principal office of the Rights Agent in Richfield Park, New Jersey, together with payment of the Purchase Price for each one-thousandth (1/1,000) of a Preferred Share 14 as to which the Rights are exercised, at or prior to the earlier of (i) the Expiration Date or (ii) the Redemption Date. (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for the Preferred Shares to be purchased together with an amount equal to any applicable transfer tax, in lawful money of the United States of America, in cash or by certified check or money order payable to the order of the Company, the Rights Agent shall thereupon (i) either (A) promptly requisition from any transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent) certificates for the number of Preferred Shares to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests or (B) if the Company shall have elected to deposit the Preferred Shares with a depositary agent under a depositary arrangement, promptly requisition from the depositary agent depositary receipts representing the number of thousandths (1/1,000s) of a Preferred Share to be purchased (in which case certificates for the Preferred Shares to be represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company will direct the depositary agent to comply with all such requests, (ii) when appropriate, promptly requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 15, (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt promptly deliver such cash to or upon the order of the registered holder of such Right Certificate. (d) In case the registered holder of any Right Certificate shall exercise fewer than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Section 15. (e) Notwithstanding anything in this Rights Agreement to the contrary, any Rights that are at any time beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring 15 Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Rights Agreement or otherwise. The Company shall use all reasonable efforts to ensure that the provisions of this Section 7(e) are complied with, but shall have no liability to any holder of any Right Certificate or any other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliate or Associate, or any transferee thereof, hereunder. (f) Notwithstanding anything in this Rights Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of any Right Certificates upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. (g) The Company may temporarily suspend, for a period of time not to exceed 90 calendar days after the Distribution Date, the exercisability of the Rights in order to prepare and file a registration statement under the Securities Act, on an appropriate form, with respect to the Preferred Shares purchasable upon exercise of the Rights and permit such registration statement to become effective; provided, however, that no such suspension shall remain -------- ------- effective after, and the Rights shall without any further action by the Company or any other Person become exercisable immediately upon, the effectiveness of such registration statement. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability 16 of the Rights has been temporarily suspended and shall issue a further public announcement at such time as the suspension is no longer in effect. Notwithstanding any provision herein to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification under the blue sky or securities laws of such jurisdiction shall not have been obtained or the exercise of the Rights shall not be permitted under applicable law. SECTION 8. Cancelation and Destruction of Right Certificates. All -------------------------------------------------- Right Certificates surrendered or presented for the purpose of exercise, transfer, split-up, combination or exchange shall, and any Right Certificate representing Rights that have become null and void and nontransferable pursuant to Section 7(e) surrendered or presented for any purpose shall, if surrendered or presented to the Company or to any of its agents, be delivered to the Rights Agent for cancelation or in canceled form, or, if surrendered or presented to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by this Rights Agreement. The Company shall deliver to the Rights Agent for cancelation and retirement, and the Rights Agent shall so cancel and retire, any Right Certificate purchased or acquired by the Company. The Rights Agent shall deliver all canceled Right Certificates to the Company pursuant to a written agreement that the Company maintain such certificates for such period of time as required by law, or shall, at the written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. SECTION 9. Reservation and Availability of Preferred Shares. (a) ------------------------------------------------- The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any authorized and issued Preferred Shares held in its treasury, free from preemptive rights or any right of first refusal, a number of Preferred Shares sufficient to permit the exercise in full of all outstanding Rights. (b) In the event that there shall not be sufficient Preferred Shares issued but not outstanding or authorized but unissued to permit the exercise or exchange of Rights in accordance with Section 11, the Company covenants and agrees that it will take all such action as may be necessary to authorize additional Preferred Shares for issuance upon the exercise or exchange of Rights pursuant to Section 11; provided, however, that if the Company is unable to -------- ------- cause the authorization of additional Preferred Shares, then the Company shall, or in lieu of 17 seeking any such authorization, the Company may, to the extent necessary and permitted by applicable law and any agreements or instruments in effect prior to the Distribution Date to which it is a party, (i) upon surrender of a Right, pay cash equal to the Purchase Price in lieu of issuing Preferred Shares and requiring payment therefor, (ii) upon due exercise of a Right and payment of the Purchase Price for each Preferred Share as to which such Right is exercised, issue equity securities having a value equal to the value of the Preferred Shares which otherwise would have been issuable pursuant to Section 11, which value shall be determined by a nationally recognized investment banking firm selected by the Board of Directors of the Company or (iii) upon due exercise of a Right and payment of the Purchase Price for each Preferred Share as to which such Right is exercised, distribute a combination of Preferred Shares, cash and/or other equity and/or debt securities having an aggregate value equal to the value of the Preferred Shares which otherwise would have been issuable pursuant to Section 11, which value shall be determined by a nationally recognized investment banking firm selected by the Board of Directors of the Company. To the extent that any legal or contractual restrictions (pursuant to agreements or instruments in effect prior to the Distribution Date to which it is party) prevent the Company from paying the full amount payable in accordance with the foregoing sentence, the Company shall pay to holders of the Rights as to which such payments are being made all amounts which are not then restricted on a pro rata basis as such payments become permissible under such legal or contractual restrictions until such payments have been paid in full. (c) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise or exchange of Rights shall, at the time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares. (d) So long as the Preferred Shares issuable upon the exercise or exchange of Rights are to be listed on any national securities exchange, the Company covenants and agrees to use its best efforts to cause, from and after such time as the Rights become exercisable or exchangeable, all Preferred Shares reserved for such issuance to be listed on such securities exchange upon official notice of issuance upon such exercise or exchange. (e) The Company further covenants and agrees that it will pay when due and payable any and all Federal and 18 state transfer taxes and charges which may be payable in respect of the issuance or delivery of Right Certificates or of any Preferred Shares or Common Shares or other securities upon the exercise or exchange of the Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or in respect of the issuance or delivery of certificates for the Preferred Shares or Common Shares or other securities, as the case may be, in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or exchange or to issue or deliver any certificates for Preferred Shares or Common Shares or other securities, as the case may be, upon the exercise or exchange of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. SECTION 10. Preferred Shares Record Date. Each Person in whose name ----------------------------- any certificate for Preferred Shares or Common Shares or other securities is issued upon the exercise or exchange of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares or Common Shares or other securities, as the case may be, represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of any Purchase Price (and any applicable transfer taxes) was made; provided, however, that, if the date of -------- ------- such surrender and payment is a date upon which the transfer books of the Company for the Preferred Shares or Common Shares or other securities, as the case may be, are closed, such Person shall be deemed to have become the record holder of such Preferred Shares or Common Shares or other securities, as the case may be, on, and such certificate shall be dated as of, the next succeeding Business Day on which the transfer books of the Company for the Preferred Shares or Common Shares or other securities, as the case may be, are open. SECTION 11. Adjustments in Rights After There Is an Acquiring Person; --------------------------------------------------------- Exchange of Rights for Shares; Business Combinations. (a) Upon a Person - ----------------------------------------------------- becoming an Acquiring Person, proper provision shall be made so that each holder of a Right, except as provided in Section 7(e), shall thereafter have a right to receive, upon exercise thereof for the Purchase Price in accordance with the terms of this Rights Agreement, such number of thousandths (1/1,000s) of a Preferred Share as shall equal the result obtained by multiplying the Purchase Price by a fraction, the numerator 19 of which is the number of thousandths (1/1,000s) of a Preferred Share for which a Right is then exercisable and the denominator of which is 50% of the Market Value of the Common Shares on the date on which a Person becomes an Acquiring Person. As soon as practicable after a Person becomes an Acquiring Person (provided the Company shall not have elected to make the exchange permitted by Section 11(b)(i) for all outstanding Rights), the Company covenants and agrees to use its best efforts to: (i) prepare and file a registration statement under the Securities Act, on an appropriate form, with respect to the Preferred Shares purchasable upon exercise of the Rights; (ii) cause such registration statement to become effective as soon as practicable after such filing; (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date; and (iv) qualify or register the Preferred Shares purchasable upon exercise of the Rights under the blue sky or securities laws of such jurisdictions as may be necessary or appropriate. (b)(i) The Board of Directors of the Company may, at its option, at any time after a Person becomes an Acquiring Person, mandatorily exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that shall have become null and void and nontransferable pursuant to the provisions of Section 7(e)) for consideration per Right consisting of either one-half of the securities that would be issuable at such time upon the exercise of one Right in accordance with Section 11(a) or, if applicable, Section 9(b)(ii) or (iii) or, if applicable the cash consideration specified in Section 9(b)(i) (the consideration issuable per Right pursuant to this Section 11(b)(i) being the "Exchange Consideration"). The Board of Directors of the Company may, at its option, issue, in substitution for Preferred Shares, Common Shares in an amount per Preferred Share equal to the Formula Number (as defined in the Articles) if there are sufficient Common Shares issued but not outstanding or authorized but unissued. If the Board of Directors of the Company elects to exchange all the Rights for Exchange Consideration pursuant to this Section 11(b)(i) prior to the physical distribution of the Rights Certificates, the Corporation may distribute the Exchange Consideration in 20 lieu of distributing Right Certificates, in which case for purposes of this Rights Agreement holders of Rights shall be deemed to have simultaneously received and surrendered for exchange Right Certificates on the date of such distribution. (ii) Any action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to Section 11(b)(i) shall be irrevocable and, immediately upon the taking of such action and without any further action and without any notice, the right to exercise any such Right pursuant to Section 11(a) shall terminate and the only right thereafter of a holder of such Right shall be to receive the Exchange Consideration in exchange for each such Right held by such holder or, if the Exchange Consideration shall not have been paid or issued, to exercise any such Right pursuant to Section 11(c)(i). The Company shall promptly give public notice of any such exchange; provided, however, that -------- ------- the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Rights for the Exchange Consideration will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which shall have become null and void and nontransferable pursuant to the provisions of Section 7(e)) held by each holder of Rights. (c)(i) In the event that, following a Distribution Date, directly or indirectly, any transactions specified in the following clause (A), (B) or (C) of this Section 11(c) (each such transaction being a "Business Combination") shall be consummated: (A) the Company shall consolidate with, or merge with and into, any Acquiring Person or any Affiliate or Associate of an Acquiring Person; (B) any Acquiring Person or any Affiliate or Associate of an Acquiring Person shall merge with and into the Company and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for capital stock or other securities of the Company or of any Acquiring Person or Affiliate or 21 Associate of an Acquiring Person or cash or any other property; or (C) the Company shall sell, lease, exchange or otherwise transfer or dispose of (or one or more of its Subsidiaries shall sell, lease, exchange or otherwise transfer or dispose of), in one or more transactions, the Major Part of the assets of the Company and its Subsidiaries (taken as a whole) to any Acquiring Person or any Affiliate or Associate of an Acquiring Person; then, in each such case, proper provision shall be made so that each holder of a Right, except as provided in Section 7(e), shall thereafter have the right to receive, upon the exercise thereof for the Purchase Price in accordance with the terms of this Rights Agreement, the securities specified below (or, at such holder's option, the securities specified in Section 11(a)): (x) if the Principal Party in such Business Combination has Registered Common Shares outstanding, each Right shall thereafter represent the right to receive, upon the exercise thereof for the Purchase Price in accordance with the terms of this Rights Agreement, such number of Registered Common Shares of such Principal Party, free and clear of all liens, encumbrances or other adverse claims, as shall have an aggregate Market Value equal to the result obtained by multiplying the Purchase Price by two; or (y) if the Principal Party involved in such Business Combination does not have Registered Common Shares outstanding, each Right shall thereafter represent the right to receive, upon the exercise thereof for the Purchase Price in accordance with the terms of this Rights Agreement, at the election of the holder of such Right at the time of the exercise thereof, any of: (1) such number of Common Shares of the Surviving Person in such Business Combination as shall have an aggregate Book Value immediately after giving effect to such Business Combination equal to the result obtained by multiplying the Purchase Price by two; (2) such number of Common Shares of the Principal Party in such Business Combination (if the Principal Party is not also the Surviving Person in such Business Combination) as shall have an aggregate Book Value immediately after giving effect to such Business Combination equal to the result obtained by multiplying the Purchase Price by two; or 22 (3) if the Principal Party in such Business Combination is an Affiliate of one or more Persons which has Registered Common Shares outstanding, such number of Registered Common Shares of whichever of such Affiliates of the Principal Party has Registered Common Shares with the greatest aggregate Market Value on the date of consummation of such Business Combination as shall have an aggregate Market Value on the date of such Business Combination equal to the result obtained by multiplying the Purchase Price by two. (ii) The Company shall not consummate any Business Combination unless each issuer of Common Shares for which Rights may be exercised, as set forth in this Section 11(c), shall have sufficient authorized Common Shares that have not been issued or reserved for issuance (and which shall, when issued upon exercise thereof in accordance with this Rights Agreement, be validly issued, fully paid and nonassessable and free of preemptive rights, rights of first refusal or any other restrictions or limitations on the transfer or ownership thereof) to permit the exercise in full of the Rights in accordance with this Section 11(c) and unless prior thereto: (A) a registration statement under the Securities Act on an appropriate form, with respect to the Rights and the Common Shares of such issuer purchasable upon exercise of the Rights, shall be effective under the Securities Act; and (B) the Company and each such issuer shall have: (1) executed and delivered to the Rights Agent a supplemental agreement providing for the assumption by such issuer of the obligations set forth in this Section 11(c) (including the obligation of such issuer to issue Common Shares upon the exercise of Rights in accordance with the terms set forth in Sections 11(c)(i) and 11(c)(iii)) and further providing that such issuer, at its own expense, will use its best efforts to: (x) cause a registration statement under the Securities Act on an appropriate form, with respect to the Rights and the Common Shares of such issuer purchasable upon exercise of the Rights, to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date; 23 (y) qualify or register the Rights and the Common Shares of such issuer purchasable upon exercise of the Rights under the blue sky or securities laws of such jurisdictions as may be necessary or appropriate; and (z) list the Rights and the Common Shares of such issuer purchasable upon exercise of the Rights on each national securities exchange on which the Common Shares were listed prior to the consummation of the Business Combination or, if the Common Shares were not listed on a national securities exchange prior to the consummation of the Business Combination, on a national securities exchange; (2) furnished to the Rights Agent a written opinion of independent counsel stating that such supplemental agreement is a valid, binding and enforceable agreement of such issuer; and (3) filed with the Rights Agent a certificate of a nationally recognized firm of independent accountants setting forth the number of Common Shares of such issuer which may be purchased upon the exercise of each Right after the consummation of such Business Combination. (iii) After consummation of any Business Combination and subject to the provisions of Section 11(c)(ii), (A) each issuer of Common Shares for which Rights may be exercised as set forth in this Section 11(c) shall be liable for, and shall assume, by virtue of such Business Combination, all the obligations and duties of the Company pursuant to this Rights Agreement, (B) the term "Company" shall thereafter be deemed to refer to such issuer, (C) each such issuer shall take such steps in connection with such consummation as may be necessary to assure that the provisions hereof (including the provisions of Sections 11(a) and 11(c)) shall thereafter be applicable, as nearly as reasonably may be, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights and (D) the number of Common Shares of each such issuer thereafter receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions of Sections 11 and 12 and the provisions of Section 7, 9 and 10 with respect to the Preferred Shares shall apply, as nearly as reasonably may be, on like terms to any such Common Shares. 24 SECTION 12. Certain Adjustments. (a) To preserve the actual or -------------------- potential economic value of the Rights, if at any time after the date of this Rights Agreement there shall be any change in the Common Shares or the Preferred Shares, whether by reason of stock dividends, stock splits, recapitalizations, mergers, consolidations, combinations or exchanges of securities, split-ups, split-offs, spin-offs, liquidations, other similar changes in capitalization, any distribution or issuance of cash, assets, evidences of indebtedness or subscription rights, options or warrants to holders of Common Shares or Preferred Shares, as the case may be (other than distribution of the Rights or regular quarterly cash dividends) or otherwise, then, in each such event the Board of Directors of the Company shall make such appropriate adjustments in the number of Preferred Shares (or the number and kind of other securities) issuable upon exercise of each Right, the Purchase Price and Redemption Price in effect at such time and the number of Rights outstanding at such time (including the number of Rights or fractional Rights associated with each Common Share) such that following such adjustment such event shall not have had the effect of reducing or limiting the benefits the holders of the Rights would have had absent such event. (b) If, as a result of an adjustment made pursuant to Section 12(a), the holder of any Right thereafter exercised shall become entitled to receive any securities other than Preferred Shares, thereafter the number of such securities so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions of Sections 11 and 12 and the provisions of Sections 7, 9 and 10 with respect to the Preferred Shares shall apply, as nearly as reasonably may be, on like terms to any such other securities. (c) All Rights originally issued by the Company subsequent to any adjustment made to the amount of Preferred Shares or other securities relating to a Right shall evidence the right to purchase, for the Purchase Price, the adjusted number and kind of securities purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (d) Irrespective of any adjustment or change in the Purchase Price or the number of Preferred Shares or number or kind of other securities issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the terms 25 which were expressed in the initial Right Certificates issued hereunder. (e) In any case in which action taken pursuant to Section 12(a) requires that an adjustment be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date the Preferred Shares and/or other securities, if any, issuable upon such exercise over and above the Preferred Shares and/or other securities, if any, issuable before giving effect to such adjustment; provided, however, that the -------- ------- Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional securities upon the occurrence of the event requiring such adjustment. SECTION 13. Certificate of Adjustment. Whenever an adjustment is -------------------------- made as provided in Section 11 or 12, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate (or, prior to the Distribution Date, of the Common Shares) in accordance with Section 25. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained. SECTION 14. Additional Covenants. (a) Notwithstanding any other --------------------- provision of this Rights Agreement, no adjustment to the number of Preferred Shares (or fractions of a share) or other securities for which a Right is exercisable or the number of Rights outstanding or associated with each Common Share or any similar or other adjustment shall be made or be effective if such adjustment would have the effect of reducing or limiting the benefits the holders of the Rights would have had absent such adjustment, including, without limitation, the benefits under Sections 11 and 12, unless the terms of this Rights Agreement are amended so as to preserve such benefits. (b) The Company covenants and agrees that, after the Distribution Date, except as permitted by Section 26, it will not take (or permit any Subsidiary of the Company to take) any action if at the time such action is taken it is intended or reasonably foreseeable that such action will reduce or otherwise limit the benefits the holders of the Rights would have had absent such action, including, without limitation, the benefits under Sections 11 and 12. Any 26 action taken by the Company during any period after any Person becomes an Acquiring Person but prior to the Distribution Date shall be null and void unless such action could be taken under this Section 14(b) from and after the Distribution Date. The Company shall not consummate any Business Combination if any issuer of Common Shares for which Rights may be exercised after such Business Combination in accordance with Section 11(c) shall have taken any action that reduces or otherwise limits the benefits the holders of the Rights would have had absent such action, including, without limitation, the benefits under Sections 11 and 12. SECTION 15. Fractional Rights and Fractional Shares. (a) The ---------------------------------------- Company may, but shall not be required to, issue fractions of Rights or distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, the Company may pay to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Right. For purposes of this Section 15(a), the current market value of a whole Right shall be the closing price of the Rights (as determined pursuant to the second and third sentences of the definition of Market Value contained in Section 1) for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. (b) The Company may, but shall not be required to, issue fractions of Preferred Shares upon exercise of the Rights or distribute certificates which evidence fractional Preferred Shares. In lieu of fractional Preferred Shares, the Company may elect to (i) utilize a depository arrangement as provided by the terms of the Preferred Shares or (ii) in the case of a fraction of a Preferred Share (other than one-thousandth (1/1,000) of a Preferred Share or any integral multiple thereof), pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share, if any are outstanding and publicly traded (or the Formula Number times the current market value of one Common Share if the Preferred Shares are not outstanding and publicly traded). For purposes of this Section 15(b), the current market value of a Preferred Share (or Common Share) shall be the closing price of a Preferred Share (or Common Share) (as determined pursuant to the second and third sentences of the definition of Market Value contained in Section 1) for the Trading Day immediately prior to the date of such exercise. If, as a result of an adjustment made 27 pursuant to Section 12(a), the holder of any Right thereafter exercised shall become entitled to receive any securities other than Preferred Shares, the provisions of this Section 15(b) shall apply, as nearly as reasonably may be, on like terms to such other securities. (c) The Company may, but shall not be required to, issue fractions of Common Shares upon exchange of Rights pursuant to Section 11(b), or to distribute certificates which evidence fractional Common Shares. In lieu of such fractional Common Shares, the Company may pay to the registered holders of the Right Certificates with regard to which such fractional Common Shares would otherwise be issuable an amount in cash equal to the same fraction of the current Market Value of one Common Share as of the date on which a Person became an Acquiring Person. (d) The holder of Rights by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right except as provided in this Section 15. SECTION 16. Rights of Action. (a) All rights of action in respect ----------------- of this Rights Agreement are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares) may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Rights Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Rights Agreement and shall be entitled to specific performance of the obligations of any Person under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Rights Agreement. (b) Any holder of Rights who prevails in an action to enforce the provisions of this Rights Agreement shall be entitled to recover the reasonable costs and expenses, including attorneys' fees, incurred in such action. 28 SECTION 17. Transfer and Ownership of Rights and Right Certificates. -------------------------------------------------------- (a) Prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares and the Rights associated with the Common Shares shall be automatically transferred upon the transfer of the Common Shares. (b) After the Distribution Date, the Right Certificates will be transferable, subject to Section 7(e), only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer. (c) The Company and the Rights Agent may deem and treat the Person in whose name a Right Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated certificate for Common Shares made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. SECTION 18. Right Certificate Holder Not Deemed a Shareholder. No -------------------------------------------------- holder, as such, of any Right Certificate shall be entitled to vote or receive dividends or be deemed, for any purpose, the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a shareholder of the Company, including, without limitation, any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders, or to receive dividends or other distributions or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof. SECTION 19. Concerning the Rights Agent. (a) The Company agrees to ---------------------------- pay to the Rights Agent reasonable compensation for all services rendered by it hereunder from time to time and its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Rights Agreement and the exercise and performance of its duties hereunder. 29 (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Rights Agreement in reliance upon any Right Certificate or certificate for the Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons. SECTION 20. Merger or Consolidation or Change of Rights Agent. (a) -------------------------------------------------- Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the stock transfer or corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Rights Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided that such corporation would be eligible for -------- appointment as a successor Rights Agent under the provisions of Section 22. In case, at the time such successor Rights Agent shall succeed to the agency created by this Rights Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and, in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Rights Agreement. (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and, in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Rights Agreement. 30 SECTION 21. Duties of Rights Agent. The Rights Agent undertakes the ----------------------- duties and obligations imposed by this Rights Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certifi- cates (or, prior to the Distribution Date, of the Common Shares), by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel satisfactory to it (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken, suffered or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Rights Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person) be proved or established by the Company prior to taking, refraining from taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, a Vice President (whether preceded by any additional title), the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Rights Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder only for its own negligence, bad faith or wilful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Rights Agreement or in the Right Certificates (except as to its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Rights Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition 31 contained in this Rights Agreement or in any Right Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 or 12 or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares or Common Shares to be issued pursuant to this Rights Agreement or any Right Certificate or as to whether any Preferred Shares or Common Shares will, when so issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Rights Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, a Vice President (whether preceded by any additional title), the Secretary or the Treasurer of the Company, and to apply to such officers for advice and instructions in connection with its duties and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. (h) The Rights Agent and any shareholder, director, officer, employee or affiliate of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Rights Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents and the Rights Agent shall not be answerable or 32 accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct provided reasonable care was exercised in the selection and continued employment thereof. (j) The Company agrees to indemnify and to hold the Rights Agent harmless against any loss, liability, damage or expense (including reasonable fees and expenses of legal counsel) which the Rights Agent may incur resulting from its actions as Rights Agent pursuant to this Rights Agreement; provided, -------- however, that the Rights Agent shall not be indemnified or held harmless with - ------- respect to any such loss, liability, damage or expense incurred by the Rights Agent as a result of, or arising out of, its own negligence, bad faith or wilful misconduct. In no case shall the Company be liable with respect to any action, proceeding, suit or claim against the Rights Agent unless the Rights Agent shall have notified the Company, by letter or by facsimile confirmed by letter, of the assertion of any action, proceeding, suit or claim against the Rights Agent, promptly after the Rights Agent shall have notice of any such assertion of an action, proceeding, suit or claim or have been served with the summons or other first legal process giving information as to the nature and basis of the action, proceeding, suit or claim. The Company shall at its own expense assume the defense of any such action, proceeding, suit or claim. In the event that the Company assumes such defense, the Company shall not thereafter be liable for the fees and expenses of any additional counsel retained by the Rights Agent, so long as the Company shall retain counsel satisfactory to the Rights Agent, in the exercise of its reasonable judgment, to defend such action, proceeding, suit or claim. In the event the Company fails so to defend, the Rights Agent agrees not to settle any litigation in connection with any action, proceeding, suit or claim with respect to which it may seek indemnification from the Company without the prior written consent of the Company. (k) The Rights Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless the Company or one or more registered holders of Right Certificates shall furnish the Rights Agent with security and indemnity to its satisfaction for any costs and expenses which may be incurred. (l) The Rights Agent shall not be liable for failure to perform any duties except as specifically set forth herein and no implied covenants or obligations shall 33 be read into this Agreement against the Rights Agent, whose duties and obligations are ministerial and shall be determined solely by the express provisions hereof. SECTION 22. Change of Rights Agent. The Rights Agent or any ----------------------- successor Rights Agent may resign and be discharged from its duties under this Rights Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Shares and the Preferred Shares by registered or certified mail, and to the holders of the Right Certificates (or, prior to the Distribution Date, of the Common Shares) by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares and the Preferred Shares by registered or certified mail, and to the holders of the Right Certificates (or, prior to the Distribution Date, of the Common Shares) by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (or, prior to the Distribution Date, of the Common Shares) who shall, with such notice, submit his Right Certificate (or, prior to the Distribution Date, the certificate representing his Common Shares) for inspection by the Company, then the registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares) may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of any state of the United States, in good standing, having a principal office in the United States, which is authorized under such laws to exercise stock, transfer or corporate trust powers and is subject to supervision or examination by Federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $25,000,000; provided that the principal transfer agent for the Common Shares -------- shall in any event be qualified to be the Rights Agent. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, 34 and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares and the Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates (or, prior to the Distribution Date, of the Common Shares). Failure to give any notice provided for in this Section 22, however, or any defect therein shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. SECTION 23. Issuance of Additional Rights and Right Certificates. ----------------------------------------------------- Notwithstanding any of the provisions of this Rights Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change made in accordance with the provisions of this Rights Agreement. In addition, in connection with the issuance or sale of Common Shares following the Distribution Date and prior to the earlier of the Redemption Date and the Expiration Date, the Company (a) shall, with respect to Common Shares so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities, notes or debentures issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (x) no -------- ------- such Right Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Right Certificate would be issued, and (y) no such Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. SECTION 24. Redemption and Termination. (a) The Board of Directors --------------------------- of the Company may, at its option, at any time prior to the earlier of (i) such time as a Person becomes an Acquiring Person and (ii) the Expiration Date, order the redemption of all, but not fewer than all, the then outstanding Rights at the Redemption Price (the date of such redemption being the "Redemption Date"), and the Company, at its option, may pay the Redemption Price either in cash or Common Shares or other securities of the Company 35 deemed by the Board of Directors of the Company, in the exercise of its sole discretion, to be at least equivalent in value to the Redemption Price. (b) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. Within 10 Business Days after the action of the Board of Directors of the Company ordering the redemption of the Rights, the Company shall give notice of such redemption to the holders of the then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Each such notice of redemption will state the method by which payment of the Redemption Price will be made. The notice, if mailed in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the holder of Rights receives such notice. In any case, failure to give such notice by mail, or any defect in the notice, to any particular holder of Rights shall not affect the sufficiency of the notice to other holders of Rights. SECTION 25. Notices. Notices or demands authorized by this -------- Agreement to be given or made by the Rights Agent or by the holder of a Right Certificate (or, prior to the Distribution Date, of the Common Shares) to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: Arch Chemicals, Inc. 501 Merritt 7 Norwalk, CT 06851 Attention of General Counsel Subject to the provisions of Section 22, any notice or demand authorized by this Rights Agreement to be given or made by the Company or by the holder of a Right Certificate 36 (or, prior to the Distribution Date, of the Common Shares) to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: ChaseMellon Shareholder Services, L.L.C. 450 West 33rd Street New York, NY 10001 Attention: Vice President of Administration Notices or demands authorized by this Rights Agreement to be given or made by the Company or the Rights Agent to any holder of a Right Certificate (or, prior to the Distribution Date, of the Common Shares) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. SECTION 26. Supplements and Amendments. At any time prior to the --------------------------- Distribution Date and subject to the last sentence of this Section 26, the Company may, and the Rights Agent shall if the Company so directs, supplement or amend any provision of this Rights Agreement (including, without limitation, the date on which the Distribution Date shall occur, the time during which the Rights may be redeemed pursuant to Section 24 or any term or provision of the Preferred Shares as set forth in the Articles) without the approval of any holder of the Rights. From and after the Distribution Date and subject to applicable law, the Company may, and the Rights Agent shall if the Company so directs, amend this Rights Agreement without the approval of any holders of Right Certificates (a) to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision of this Rights Agreement or (b) to make any other provisions in regard to matters or questions arising hereunder which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Right Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person). Any supplement or amendment adopted during any period after any Person has become an Acquiring Person but prior to the Distribution Date shall be null and void unless such supplement or amendment could have been adopted under the prior sentence from and after the Distribution Date. Any supplement or amendment to this Rights Agreement duly approved by the Company that does not amend Sections 19, 20, 21 or 22 in a manner adverse to the 37 Rights Agent shall become effective immediately upon execution by the Company, whether or not also executed by the Rights Agent. In addition, notwithstanding anything to the contrary contained in this Rights Agreement, no supplement or amendment to this Rights Agreement shall be made which (x) reduces the Redemption Price (except as required by Section 12(a)) or (y) provides for an earlier Expiration Date. SECTION 27. Successors. All the covenants and provisions of this ----------- Rights Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 28. Benefits of Rights Agreement; Determinations and Actions -------------------------------------------------------- by the Board of Directors, etc. (a) Nothing in this Rights Agreement shall be - ------------------------------- construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, of the Common Shares) any legal or equitable right, remedy or claim under this Rights Agreement; but this Rights Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, of the Common Shares). (b) Except as explicitly otherwise provided in this Rights Agreement, the Board of Directors of the Company shall have the exclusive power and authority to administer this Rights Agreement and to exercise all rights and powers specifically granted to the Board of Directors of the Company or to the Company, or as may be necessary or advisable in the administration of this Rights Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Rights Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Rights Agreement (including, without limitation, a determination to redeem or not redeem the Rights or to amend this Rights Agreement and whether there is an Acquiring Person). (c) Nothing contained in this Rights Agreement shall be deemed to be in derogation of the obligation of the Board of Directors of the Company to exercise its fiduciary duty. Without limiting the foregoing, nothing contained herein shall be construed to suggest or imply that the Board of Directors shall not be entitled to reject any tender offer, or to recommend that holders of Common Shares reject any tender offer, or to take any other action (including, without limitation, the commencement, prosecution, defense 38 or settlement of any litigation and the submission of additional or alternative offers or other proposals) with respect to any tender offer that the Board of Directors believes is necessary or appropriate in the exercise of such fiduciary duty. SECTION 29. Severability. If any term, provision, covenant or ------------- restriction of this Rights Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Rights Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. SECTION 30. Governing Law. This Rights Agreement and each Right -------------- Certificate issued hereunder shall be deemed to be a contract made under the law of the Commonwealth of Virginia and for all purposes shall be governed by and construed in accordance with the law of such Commonwealth applicable to contracts to be made and performed entirely within such Commonwealth except that the duties and rights of the Rights Agent shall be governed by the law of the State of New York without reference to the choice of law doctrine of such State. SECTION 31. Counterparts; Effectiveness. This Rights Agreement may ---------------------------- be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. This Rights Agreement shall be effective as of the Close of Business on the date hereof. 39 SECTION 32. Descriptive Headings. Descriptive headings of the --------------------- several Sections of this Rights Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions of this Rights Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to be duly executed as of the day and year first above written. ARCH CHEMICALS, INC., by ___________________________ Name: Title: CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Rights Agent, by ___________________________ Name: Title: EXHIBIT A ================================================================================ AMENDED AND RESTATED ARTICLES OF INCORPORATION of ARCH CHEMICALS, INC. ================================================================================ AMENDED AND RESTATED ARTICLES OF INCORPORATION OF ARCH CHEMICALS, INC. ARTICLE I The name of the Corporation shall be Arch Chemicals, Inc. ARTICLE II The purpose for which the Corporation is formed is to transact any or all lawful business, not required to be specifically stated in these Articles of Incorporation, for which corporations may be incorporated under the Virginia Stock Corporation Act, as amended from time to time, and any legislation succeeding thereto (the "VSCA"). All references herein to "Articles of Incorporation" shall mean these Amended and Restated Articles of Incorporation, as subsequently amended or restated in accordance herewith and with the VSCA. ARTICLE III The aggregate number of shares that the Corporation shall have authority to issue shall be 10,000,000 shares of Preferred Stock, par value $1 per share (hereinafter called "Preferred Stock"), and 100,000,000 shares of Common Stock, par value $1 per share (hereinafter called "Common Stock"). The following is a description of each of such classes of stock, and a statement of the preferences, limitations, voting rights and relative rights in respect of the shares of each such class: 1. Authority to Fix Rights of Preferred Stock. The Board of ------------------------------------------ Directors shall have authority, by resolution or resolutions, at any time and from time to time to divide and establish any or all of the unissued shares of Preferred Stock not then allocated to any series of Preferred Stock into one or more series, and, without limiting the generality of the foregoing, to fix and determine the designation of each such series, the number of shares that shall constitute such series and the following relative rights and preferences of the shares of each series so established: (a) The annual or other periodic dividend rate payable on shares of such series, the time of payment thereof, whether such dividends shall be cumulative or non-cumulative, and the date or dates from which any cumulative dividends shall commence to accrue; (b) the price or prices at which and the terms and conditions, if any, on which shares of such series may be redeemed; (c) the amounts payable upon shares of such series in the event of the voluntary or involuntary dissolution, liquidation or winding-up of the affairs of the Corporation; (d) the sinking fund provisions, if any, for the redemption or purchase of shares of such series; (e) the extent of the voting powers, if any, of the shares of such series; (f) the terms and conditions, if any, on which shares of such series may be converted into shares of stock of the Corporation of any other class or classes or into shares of any other series of the same or any other class or classes; (g) whether, and if so the extent to which, shares of such series may participate with the Common Stock in any dividends in excess of the preferential dividend fixed for shares of such series or in any distribution of the assets of the Corporation, upon a liquidation, dissolution or winding-up thereof, in excess of the preferential amount fixed for shares of such series; and (h) any other preferences and relative, optional or other special rights, and qualifications, limitations or restrictions of such preferences or rights, of shares of such series not fixed and determined by law or in this Article III. 2. Distinctive Designations of Series. Each series of Preferred ---------------------------------- Stock shall be so designated as to distinguish the shares thereof from the shares of all other series. Different series of Preferred Stock shall not be considered to constitute different voting groups of shares for the purpose of voting by voting groups except as required by the VSCA or as otherwise specified by the Board of Directors with respect to any series at the time of the creation thereof. 3. Restrictions on Certain Distributions. So long as any shares of ------------------------------------- Preferred Stock are outstanding, the Corporation shall not declare and pay or set apart 2 for payment any dividends (other than dividends payable in Common Stock or other stock of the Corporation ranking junior to the Preferred Stock as to dividends) or make any other distribution on such junior stock if, at the time of making such declaration, payment or distribution, the Corporation shall be in default with respect to any dividend payable on, or any obligation to redeem, any shares of Preferred Stock. 4. Redeemed or Reacquired Shares. Shares of any series of Preferred ----------------------------- Stock that have been redeemed or otherwise reacquired by the Corporation (whether through the operation of a sinking fund, upon conversion or otherwise) shall have the status of authorized and unissued shares of Preferred Stock and may be redesignated and reissued as a part of such series (unless prohibited by the articles of amendment creating such series) or of any other series of Preferred Stock. Shares of Common Stock that have been reacquired by the Corporation shall have the status of authorized and unissued shares of Common Stock and may be reissued. 5. Voting Rights. Subject to the provisions of the VSCA or of the ------------- Bylaws of the Corporation as from time to time in effect with respect to the closing of the transfer books or the fixing of a record date for the determination of shareholders entitled to vote, and except as otherwise provided by the VSCA or in resolutions of the Board of Directors establishing any series of Preferred Stock pursuant to the provisions of paragraph 1 of this Article III, the holders of outstanding shares of Common Stock of the Corporation shall exclusively possess voting power for the election of directors and for all other purposes, with each holder of record of shares of Common Stock of the Corporation being entitled to one vote for each share of such stock standing in his name on the books of the Corporation. 6. No Preemptive Rights. No holder of shares of stock of any class -------------------- of the Corporation shall, as such holder, have any right to subscribe for or purchase (a) any shares of stock of any class of the Corporation, or any warrants, options or other instruments that shall confer upon the holder thereof the right to subscribe for or purchase or receive from the Corporation any shares of stock of any class, whether or not such shares of stock, warrants, options or other instruments are issued for cash or services or property or by way of dividend or otherwise, or (b) any other security of the Corporation that shall be convertible into, or exchangeable for, any shares of stock of the Corporation of any class or classes, or to which shall be attached or appurtenant any warrant, option or other instrument that shall confer upon the holder of such security the right to subscribe for or purchase or receive from the Corporation any shares of its stock of any class or classes, whether or not such securities are issued for cash or services or property or by way of dividend or otherwise, other than such right, if any, as the Board of Directors, in its sole discretion, may from time to time determine. If the Board of Directors shall offer to the holders of shares of stock of any class of the Corporation, or any of them, any such shares of stock, options, warrants, instruments or other securities of the Corporation, such offer shall not, in 3 any way, constitute a waiver or release of the right of the Board of Directors subsequently to dispose of other securities of the Corporation without offering the same to said holders. 7. Control Share Acquisition Statute. The provisions of Article --------------------------------- 14.1 of the VSCA shall not apply to acquisitions of shares of any class of capital stock of the Corporation. 8. Series A Participating Cumulative Preferred Stock. There is ------------------------------------------------- hereby established a series of the Corporation's authorized Preferred Stock, to be designated as the "Series A Participating Cumulative Preferred Stock, par value $1 per share." The designation and number, and relative rights, preferences and limitations of the Series A Participating Cumulative Preferred Stock, insofar as not already fixed by any other provision of the Articles of Incorporation, shall be as follows: SECTION 1. Designation and Number of Shares. The shares of such -------------------------------- series shall be designated as "Series A Participating Cumulative Preferred Stock" (the "Series A Preferred Stock"), par value $1 per share. The number of shares initially constituting the Series A Preferred Stock shall be 30,000; provided, however, that, if more than -------- ------- a total of 30,000 shares of Series A Preferred Stock shall be issuable upon the exercise of Rights (the "Rights") issued pursuant to the Rights Agreement dated as of January 29, 1999, between the Corporation and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights Agreement"), the Board of Directors of the Corporation, pursuant to Section 13.1-639 of the VSCA, shall direct by resolution or resolutions that articles of amendment of the Articles of Incorporation of the Corporation be properly executed and filed with the State Corporation Commission of Virginia providing for the total number of shares of Series A Preferred Stock authorized to be issued to be increased (to the extent that the Articles of Incorporation then permit) to the largest number of whole shares (rounded up to the nearest whole number) issuable upon exercise of such Rights. SECTION 2. Dividends or Distributions. (a) Subject to the prior -------------------------- and superior rights of the holders of shares of any other series of Preferred Stock or other class of capital stock of the Corporation ranking prior and superior to the shares of Series A Preferred Stock with respect to dividends, the holders of shares of the Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of the assets of the Corporation legally available therefor, (i) quarterly dividends payable in cash on the last day of each fiscal quarter in each year, or such other dates as the Board of Directors of the Corporation shall approve (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or a 4 fraction of a share of Series A Preferred Stock, in the amount of $.01 per whole share (rounded to the nearest cent), less the amount of all cash dividends declared on the Series A Preferred Stock pursuant to the following clause (ii) since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock (the total of which shall not, in any event, be less than zero) and (ii) dividends payable in cash on the payment date for each cash dividend declared on the Common Stock in an amount per whole share (rounded to the nearest cent) equal to the Formula Number (as hereinafter defined) then in effect times the cash dividends then to be paid on each share of Common Stock. In addition, if the Corporation shall pay any dividend or make any distribution on the Common Stock payable in assets, securities or other forms of non-cash consideration (other than dividends or distributions solely in shares of Common Stock), then, in each such case, the Corporation shall simultaneously pay or make on each outstanding whole share of Series A Preferred Stock a dividend or distribution in like kind equal to the Formula Number then in effect times such dividend or distribution on each share of the Common Stock. As used herein, the "Formula Number" shall be 1,000; provided, however, that, if at any time after February 9, 1999, the Corporation shall (x) declare or pay any dividend on the Common Stock payable in shares of Common Stock or make any distribution on the Common Stock in shares of Common Stock, (y) subdivide (by a stock split or otherwise) the outstanding shares of Common Stock into a larger number of shares of Common Stock or (z) combine (by a reverse stock split or otherwise) the outstanding shares of Common Stock into a smaller number of shares of Common Stock, then, in each such event, the Formula Number shall be adjusted to a number determined by multiplying the Formula Number in effect immediately prior to such event by a fraction, the numerator of which is the number of shares of Common Stock that are outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event (and rounding the result to the nearest whole number); and provided further, that, if at any time after February 9, -------- ------- 1999, the Corporation shall issue any shares of its capital stock in a merger, reclassification, or change of the outstanding shares of Common Stock, then, in each such event, the Formula Number shall be appropriately adjusted to reflect such merger, reclassification or change so that each share of Preferred Stock continues to be the economic equivalent of a Formula Number of shares of Common Stock prior to such merger, reclassification or change. (b) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in Section 2(a) immediately prior to or at the same time it declares a dividend or distribution on the Common Stock (other than a dividend or distribution solely in shares of Common Stock); 5 provided, however, that, in the event no dividend or distribution -------- ------- (other than a dividend or distribution in shares of Common Stock) shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $.01 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a dividend or distribution declared thereon, which record date shall be the same as the record date for any corresponding dividend or distribution on the Common Stock. (c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from and after the Quarterly Dividend Payment Date next preceding the date of original issue of such shares of Series A Preferred Stock; provided, however, -------- ------- that dividends on such shares that are originally issued after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and on or prior to the next succeeding Quarterly Dividend Payment Date shall begin to accrue and be cumulative from and after such Quarterly Dividend Payment Date. Notwithstanding the foregoing, dividends on shares of Series A Preferred Stock that are originally issued prior to the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend on the first Quarterly Dividend Payment Date shall be calculated as if cumulative from and after the last day of the fiscal quarter next preceding the date of original issuance of such shares. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. (d) So long as any shares of the Series A Preferred Stock are outstanding, no dividends or other distributions shall be declared, paid or distributed, or set aside for payment or distribution, on the Common Stock, unless, in each case, the dividend required by this Section 2 to be declared on the Series A Preferred Stock shall have been declared. (e) The holders of the shares of Series A Preferred Stock shall not be entitled to receive any dividends or other distributions, except as provided herein. SECTION 3. Voting Rights. The holders of shares of Series A ------------- Preferred Stock shall have the following voting rights: 6 (a) Each holder of Series A Preferred Stock shall be entitled to a number of votes equal to the Formula Number then in effect, for each share of Series A Preferred Stock held of record on each matter on which holders of the Common Stock or shareholders generally are entitled to vote, multiplied by the maximum number of votes per share that any holder of the Common Stock or shareholders generally then have with respect to such matter (assuming any holding period or other requirement to vote a greater number of shares is satisfied). (b) Except as otherwise provided in this Section 3 or by the VSCA, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one voting group for the election of directors of the Corporation and on all other matters submitted to a vote of shareholders of the Corporation. (c) If, at the time of any annual meeting of shareholders at which the election of directors is to be considered, the equivalent of six quarterly dividends (whether or not consecutive) payable on any share or shares of Series A Preferred Stock are in default, the number of directors constituting the Board of Directors of the Corporation shall be increased by two. In addition to voting together with the holders of Common Stock for the election of other directors of the Corporation, the holders of record of the Series A Preferred Stock, voting as a single voting group, to the exclusion of the holders of Common Stock, shall be entitled at said meeting of shareholders (and at each subsequent annual meeting of shareholders), unless all dividends in arrears have been paid or declared and set apart for payment prior thereto, to vote for the election of two directors of the Corporation, the holders of any Series A Preferred Stock being entitled to cast a number of votes per share of Series A Preferred Stock equal to the Formula Number. Until the default in payments of all dividends that permitted the election of said directors shall cease to exist, any director who shall have been so elected pursuant to the next preceding sentence may be removed at any time, either with or without cause, only by the affirmative vote of the holders of the shares of Series A Preferred Stock at the time entitled to cast a majority of the votes entitled to be cast for the election of any such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled by the vote of such holders. If and when such default shall cease to exist, the holders of the Series A Preferred Stock shall be divested of the foregoing special voting rights, subject to revesting in the event of each and every subsequent like default in payments of dividends. Upon the termination of the foregoing special voting rights, the terms of office of all persons who may have been elected directors pursuant to said special voting rights shall forthwith terminate, and the number of directors constituting the Board of Directors shall be reduced by two. The voting rights granted by this Section 3(c) shall be in 7 addition to any other voting rights granted to the holders of the Series A Preferred Stock in this Section 3. (d) Except as provided in this Section 3, in Section 11 or by the VSCA, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for authorizing or taking any corporate action. SECTION 4. Certain Restrictions. (a) Whenever quarterly -------------------- dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock; provided that the Corporation may at any time redeem, -------- purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good 8 faith will result in fair and equitable treatment among the respective series or classes. (b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. SECTION 5. Liquidation Rights. Upon the liquidation, ------------------ dissolution or winding up of the Corporation, whether voluntary or involuntary, no distribution shall be made (a) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received an amount equal to the accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an amount equal to the greater of (i) $.01 per whole share or (ii) an aggregate amount per share equal to the Formula Number then in effect times the aggregate amount to be distributed per share to holders of Common Stock or (b) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. SECTION 6. Consolidation, Merger, etc. In case the Corporation -------------------------- shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash or any other property, then, in any such case, the then outstanding shares of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share equal to the Formula Number then in effect times the aggregate amount of stock, securities, cash or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is exchanged or changed. In the event both this Section 6 and Section 2 appear to apply to a transaction, this Section 6 will control. SECTION 7. No Redemption; No Sinking Fund. (a) The shares of ------------------------------ Series A Preferred Stock shall not be subject to redemption by the Corporation or at the option of any holder of Series A Preferred Stock; provided, however, that, subject to clause (a)(iv) of Section -------- ------- 4, the Corporation may purchase or otherwise acquire outstanding shares of Series A Preferred Stock in the open market or by offer to any holder or holders of shares of Series A Preferred Stock. 9 (b) The shares of Series A Preferred Stock shall not be subject to or entitled to the operation of a retirement or sinking fund. SECTION 8. Ranking. The Series A Preferred Stock shall rank ------- junior to all other series of Preferred Stock of the Corporation, unless the Board of Directors shall specifically determine otherwise in fixing the powers, preferences and relative, participating, optional and other special rights of the shares of such series and the qualifications, limitations and restrictions of any such other series. SECTION 9. Fractional Shares. The Series A Preferred Stock ----------------- shall be issuable upon exercise of the Rights issued pursuant to the Rights Agreement in whole shares or in any fraction of a share that is one-thousandth (1/1,000) of a share or any integral multiple of such fraction, which shall entitle the holder, in proportion to such holder's fractional shares, to receive dividends, exercise voting rights, participate in distributions and have the benefit of all other rights of holders of Series A Preferred Stock. In lieu of fractional shares, the Corporation, prior to the first issuance of a share or a fraction of a share of Series A Preferred Stock, may elect (a) to make a cash payment as provided in the Rights Agreement for fractions of a share other than one-thousandth (1/1,000) of a share or any integral multiple thereof or (b) to issue depository receipts evidencing such authorized fraction of a share of Series A Preferred Stock pursuant to an appropriate agreement between the Corporation and a depository selected by the Corporation; provided that such agreement shall -------- provide that the holders of such depository receipts shall have all the rights, privileges and preferences to which they are entitled as holders of the Series A Preferred Stock. SECTION 10. Reacquired Shares. Any shares of Series A Preferred ----------------- Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, undesignated as to series, and may thereafter be reissued as part of a new series of such Preferred Shares as permitted by the VSCA. SECTION 11. Amendment. None of the powers, preferences and --------- relative, participating, optional and other special rights of the Series A Preferred Stock as provided herein or in the Articles of Incorporation shall be amended in any manner that would alter or change the powers, preferences, rights or privileges of the holders of Series A Preferred Stock so as to affect such holders adversely without the affirmative vote of the holders of more than 66-2/3% of the outstanding shares of Series A Preferred Stock, voting as a single voting group; provided, however, that no such amendment so approved -------- ------- 10 by the holders of more than 66-2/3% of the outstanding shares of Series A Preferred Stock shall be deemed to apply to the powers, preferences, rights or privileges of any holder of shares of Series A Preferred Stock originally issued upon exercise of a Right after the time of such approval without the approval of such holder. ARTICLE IV 1. The number of directors shall be as specified in the By-laws of the Corporation but such number may be increased or decreased from time to time in such manner as may be prescribed in the By-laws, provided that in no event shall the number of directors exceed ten. In the absence of a By- law specifying the number of directors, the number shall be eight. Commencing with the 1999 annual meeting of shareholders (or by unanimous written consent in lieu thereof), the Board of Directors shall be divided into three classes, Class I, Class II, and Class III, as nearly equal in number as possible. The initial term of each class of directors shall expire at the annual meeting of shareholders to be held in the following years: Class I - 2000; Class II - 2001; and Class III - 2002. At each annual meeting of shareholders after the 1999 annual meeting of shareholders, the successors to the class of directors whose term shall then expire shall be identified as being of the same class of directors they succeed and shall be elected to hold office for a term expiring at the third succeeding annual meeting of shareholders. When the number of directors is changed, any newly-created directorships or any decrease in directorships shall be so apportioned among the classes by the Board of Directors as to make all classes as nearly equal in number as possible; provided, however, that no decrease in the number of directors shall shorten or terminate the term of any incumbent director. 2. Subject to the rights of the holders of any Preferred Stock then outstanding, directors may be removed only with cause and only by the affirmative vote of at least 80 percent of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors ("Voting Stock"), voting together as a single voting group. 3. Subject to the rights of the holders of any Preferred Stock then outstanding and to any limitations set forth in the VSCA, newly-created directorships resulting from any increase in the number of directors and any vacancies in the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled solely (i) by the Board of Directors or (ii) at an annual meeting of shareholders by the shareholders entitled to vote on the election of directors. If the directors remaining in office constitute fewer than a quorum of the Board, they may fill the vacancy by the affirmative vote of a majority of the directors remaining in office. 11 4. Notwithstanding any other provision of the Articles of Incorporation or any provision of law that might otherwise permit a lesser vote, but in addition to any affirmative vote of the holders of any particular voting group required by the VSCA, the Articles of Incorporation or the terms of any Preferred Stock outstanding, the affirmative vote of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single voting group shall be required to alter, amend, repeal or adopt any provision inconsistent with any provision of this Article IV. ARTICLE V Except as expressly otherwise required in the Articles of Incorporation, an amendment or restatement of the Articles of Incorporation requiring shareholder approval shall be approved by a majority of the votes entitled to be cast by each voting group that is entitled to vote on the matter, unless in submitting any such amendment or restatement to the shareholders the Board of Directors shall require a greater vote. ARTICLE VI 1. Every person who is or was a director, officer or employee of the Corporation, or who, at the request of the Corporation, serves or has served in any such capacity with another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise shall be indemnified by the Corporation against any and all liability and reasonable expense that may be incurred by him in connection with or resulting from any claim, action or proceeding (whether brought in the right of the Corporation or any such other corporation, entity, plan or otherwise), in which he may become involved, as a party or otherwise, by reason of his being or having been a director, officer or employee of the Corporation, or such other corporation, entity or plan while serving at the request of the Corporation, whether or not he continues to be such at the time such liability or expense is incurred, unless such person engaged in willful misconduct or a knowing violation of the criminal law. As used in this Article VI: (a) the terms "liability" and "expense" shall include, but shall not be limited to, counsel fees and disbursements and amounts of judgments, fines or penalties against, and amounts paid in settlement by, a director, officer or employee; (b) the terms "director," "officer" and employee," unless the context otherwise requires, include the estate or personal representative of any such person; (c) a person is considered to be serving an employee benefit plan as a director, officer or employee of the plan at the Corporation's request if his duties to the Corporation also impose duties on, or otherwise involve services by, him to the plan or, in connection with the plan, to participants in or beneficiaries of the plan; (d) the term "occurrence" means any act or failure to act, actual or alleged, giving rise to 12 a claim, action or proceeding; and (e) service as a trustee or as a member of a management or similar committee of a partnership, joint venture or limited liability company shall be considered service as a director, officer or employee of the trust, partnership, joint venture or limited liability company. The termination of any claim, action or proceeding, civil or criminal, by judgment, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that a director, officer or employee did not meet the standards of conduct set forth in this paragraph 1. The burden of proof shall be on the Corporation to establish, by a preponderance of the evidence, that the relevant standards of conduct set forth in this paragraph 1 have not been met. 2. Any indemnification under paragraph 1 of this Article VI shall be made unless (a) the Board, acting by a majority vote of those directors who were directors at the time of the occurrence giving rise to the claim, action or proceeding involved and who are not at the time parties to such claim, action or proceeding (provided there are at least five such directors), finds that the director, officer or employee has not met the relevant standards of conduct set forth in such paragraph 1, or (b) if there are not at least five such directors, the Corporation's principal Virginia legal counsel, as last designated by the Board as such prior to the time of the occurrence giving rise to the claim, action or proceeding involved, or in the event for any reason such Virginia counsel is unwilling to so serve, then Virginia legal counsel mutually acceptable to the Corporation and the person seeking indemnification, deliver to the Corporation their written advice that, in their opinion, such standards have not been met. 3. Expenses incurred with respect to any claim, action or proceeding of the character described in paragraph 1 shall, except as otherwise set forth in this paragraph 3, be advanced by the Corporation prior to the final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Article VI. No security shall be required for such undertaking and such undertaking shall be accepted without reference to the recipient's final ability to make repayment. Notwithstanding the foregoing, the Corporation may refrain from, or suspend, payment of expenses in advance if at any time before delivery of the final finding described in paragraph 2, the Board or Virginia legal counsel, as the case may be, acting in accordance with the procedures set forth in paragraph 2, find by a preponderance of the evidence then available that the officer, director or employee has not met the relevant standards of conduct set forth in paragraph 1. 4. No amendment or repeal of this Article VI shall adversely affect or deny to any director, officer or employee the rights of indemnification provided in this Article VI with respect to any liability or expense arising out of a claim, action or proceeding based in whole or substantial part on an occurrence the inception of which 13 takes place before or while this Article VI, as set forth in these Amended and Restated Articles of Incorporation, is in effect. The provisions of this paragraph 4 shall apply to any such claim, action or proceeding whenever commenced, including any such claim, action or proceeding commenced after any amendment or repeal to this Article VI. 5. The rights of indemnification provided in this Article VI shall be in addition to any rights to which any such director, officer or employee may otherwise be entitled by contraction or as a matter of law. 6. In any proceeding brought by or in the right of the Corporation or brought by or on behalf of shareholders of the Corporation, no director or officer of the Corporation shall be liable to the Corporation or its shareholders for monetary damages with respect to any transaction, occurrence or course of conduct, whether prior or subsequent to the effective date of this Article VI, except for liability resulting from such person's having engaged in willful misconduct or a knowing violation of the criminal law or any federal or state securities law. ARTICLE VII In furtherance of, and not in limitation of, the powers conferred by the VSCA, the Board of Directors is expressly authorized and empowered to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that the Bylaws adopted by the Board of Directors under the powers hereby conferred may be altered, amended or repealed by the Board of Directors or by the shareholders having voting power with respect thereto, provided further that, in the case of any such action by shareholders, the affirmative vote of the holders of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single voting group, shall be required in order for the shareholders to alter, amend or repeal any provision of the Bylaws or to adopt any additional Bylaw. Notwithstanding any other provision of the Articles of Incorporation or any provision of law that might otherwise permit a lesser vote, but in addition to any affirmative vote of the holders of any particular voting group required by the VSCA, the Articles of Incorporation or the terms of any Preferred Stock outstanding, the affirmative vote of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single voting group, shall be required to alter, amend, repeal or adopt any provision inconsistent with any of the provisions of this Article VII. 14 EXHIBIT B [Form of Right Certificate] Certificate No. [R]- ___________ Rights NOT EXERCISABLE AFTER JANUARY[ ], 2009, OR EARLIER, IF REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER RIGHT, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE NULL AND VOID AND NONTRANSFERABLE. Right Certificate ARCH CHEMICALS, INC. This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement dated as of January [ ], 1999 (the "Rights Agreement"), between Arch Chemicals, Inc., a Virginia corporation (the "Company"), and ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability company, as Rights Agent (the "Rights Agent"), unless the Rights evidenced hereby shall have been previously redeemed by the Company, to purchase from the Company at any time after the Distribution Date (as defined in the Rights Agreement) and prior to 5:00 p.m., New York City time, on the 10th anniversary of the date of the Rights Agreement (the "Expiration Date"), at the principal office of the Rights Agent, or its successors as Rights Agent, in New York, New York, one-thousandth (1/1,000) of a fully paid, nonassessable share of Series A Participating Cumulative Preferred Stock, without par value, of the Company (the "Preferred Shares"), at a purchase price per one-thousandth (1/1,000) of a share equal to $55 (the "Purchase Price"), payable in cash, upon presentation and surrender of this Right Certificate with the Form of Election to Purchase duly executed. The Purchase Price and the number and kind of shares which may be purchased upon exercise of each Right evidenced by this Right Certificate, as set forth above, are the 2 Purchase Price and the number and kind of shares which may be so purchased as of January [ ], 1999. As provided in the Rights Agreement, the Purchase Price and the number and kind of shares which may be purchased upon the exercise of each Right evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events. If the Rights evidenced by this Right Certificate are at any time beneficially owned by an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement), such Rights shall be null and void and nontransferable and the holder of any such Right (including any purported transferee or subsequent holder) shall not have any right to exercise or transfer any such Right. This Right Certificate is subject to all the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof, and reference to the Rights Agreement is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are also available from the Company upon written request. This Right Certificate, with or without other Right Certificates, upon surrender at the principal stock transfer or corporate trust office of the Rights Agent, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number and kind of shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Right Certificate may be redeemed by the Company at its option at a redemption price (in cash or shares of Common Stock or other securities of the Company deemed by the Board of Directors to be at least equivalent in value) of $.01 per Right (which amount shall be subject to adjustment as provided in the Rights Agreement) at any time prior to the earlier of (a) such time as a Person becomes an Acquiring Person and (b) the Expiration Date. 3 The Company may, but shall not be required to, issue fractions of Preferred Shares or distribute certificates which evidence fractions of Preferred Shares upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing fractional shares, the Company may elect to make a cash payment as provided in the Rights Agreement for fractions of a share other than one- thousandth (1/1,000) of a share or any integral multiple thereof or to issue certificates or to utilize a depositary arrangement as provided in the terms of the Rights Agreement and the Preferred Shares. No holder of this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Company, including, without limitation, any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement), or to receive dividends or other distributions or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in accordance with the provisions of the Rights Agreement. 4 This Right Certificate shall not be valid or obligatory for any purpose until it shall have been counter-signed by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of: , ____ ARCH CHEMICALS, INC., by ____________________________ Name: Title: Attest: _________________________ Name: Title: Countersigned: CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as Rights Agent, by _____________________ Authorized Officer 5 [On Reverse Side of Right Certificate] FORM OF ELECTION TO PURCHASE ---------------------------- (To be executed by the registered holder if such holder desires to exercise the Rights represented by this Right Certificate.) To the Rights Agent: The undersigned hereby irrevocably elects to exercise __________ Rights represented by this Right Certificate to purchase the Preferred Shares (or other shares) issuable upon the exercise of such Rights and requests that certificates for such shares be issued in the name of: Please insert social security or other identifying number - -------------------------------------------------------------------------------- (Please print name and address) - -------------------------------------------------------------------------------- If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to: 6 Please insert social security or other identifying number - -------------------------------------------------------------------------------- (Please print name and address) - -------------------------------------------------------------------------------- Dated: ___________, ____ ______________________________ Signature Signature Guaranteed: FORM OF ASSIGNMENT ------------------ (To be executed by the registered holder if such holder desires to transfer the Right Certificate.) FOR VALUE RECEIVED _______________________________ hereby sells, assigns and transfers unto ___________________ ____________________________________________________________ (Please print name and address of transferee) ____________________________________________________________ this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ______________ Attorney, to transfer the within Right Certificate on the books of the within-named Corporation, with full power of substitution. Dated: ____________, ____ ______________________________ Signature Signature Guaranteed: The undersigned hereby certifies that (a) the Rights evidenced by this Right Certificate are not being sold, assigned or transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), (b) this Rights Certificate is not being sold, assigned or transferred to or on behalf of any such 7 Acquiring Person, Affiliate or Associate, and (c) after inquiry and to the best knowledge of the undersigned, the undersigned did not acquire the Rights evidenced by this Right Certificate from any Person who is or was an Acquiring Person or an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement). ______________________________ Signature NOTICE ------ The signature on the foregoing Form of Election to Purchase or Form of Assignment must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. EX-10.2 7 CHARLESTON SERVICES AGREEMENT EXHIBIT 10.2 Charleston SERVICES AGREEMENT ------------------ This Agreement is entered into as of the ___ day of ________, 1999, by and between Arch Chemicals, Inc., a Virginia corporation (hereinafter "ARCH"), and Olin Corporation, a Virginia corporation (hereinafter "OLIN"). WITNESSETH: ---------- WHEREAS, OLIN and ARCH have entered into a Distribution Agreement (as defined below); WHEREAS, pursuant to the Distribution Agreement, OLIN has agreed to transfer certain assets and businesses constituting the Arch Assets and the Arch Business, respectively (each as defined in the Distribution Agreement) to ARCH; WHEREAS, included in the Arch Business are certain assets and operations located at the Charleston, Tennessee chlor alkali and pool chemicals facility owned and operated by OLIN prior to the Distribution Date (as defined in the Distribution Agreement); and WHEREAS, following the Distribution Date, OLIN and ARCH have both requested from each other, and each has agreed, that ARCH receive certain services to be provided by OLIN, and that OLIN receive certain services to be provided by ARCH, for their respective operations at the Charleston, Tennessee facilities, on the terms and conditions as set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, OLIN and ARCH agree as follows: ARTICLE I DEFINITIONS ----------- As used in this Agreement, the following terms have the following meanings: "Authorized Representative" means the plant manager of each Party at ------------------------- the Charleston Site, who shall be responsible for implementing this Agreement at the Charleston Site. "Budgeted Service Quantity" means the quantity of a Service the ------------------------- Service Provider has agreed to provide and the Service Receiver has agreed to receive during the next Contract Year. "Budgeted Service Quantity Percentage" means the quantity the Service ------------------------------------ Receiver has requested and the Service Provider has agreed to provide, expressed as a percentage of the total of that Service which is budgeted to be produced or available during the next Contract Year at the Charleston Site "Capital Carrying Charge" means a cost to cover the financing of a ----------------------- capital project or capital investment by the Service Provider, as further described in Section 5.01(c). "Charleston Plant" means OLIN's chlor-alkali and pool chemicals ---------------- facility located in Charleston, Tennessee as it existed and operated prior to the Distribution Date. "Charleston Site" means the combined operations of Olin Corporation --------------- and Arch Chemicals, Inc. located in Charleston, Tennessee on the former site of OLIN's Charleston Plant, as of the Distribution Date. "Claim(s)" shall mean any action, claim, demand, interference, -------- obligation, suit, arbitration or other proceeding brought or asserted by or against a Party to this Agreement. "Contract Year" means the First Contract Year and each calendar year ------------- thereafter during the term of this Agreement, or any shorter period commencing on any January 1 and ending, as to any Service upon expiration of its Term, and as to this Agreement at the termination of this Agreement. "Curtailment Plan" means the Charleston Site Plan for the sequence in ---------------- which Services will be reduced or temporarily suspended for the various operating units. "Damages" shall mean all costs, liabilities, obligations, damages, ------- fines, penalties, deficiencies, losses and judgments, including incidental damages, consequential damages, punitive damages, strict liability, and reasonable attorneys' fees, in each case after the application of any amounts recoverable under insurance contracts or similar arrangements and recoverable from third parties by the Entity claiming indemnity. "Distribution Agreement" means the Distribution Agreement dated as of ---------------------- [________], 1999, between OLIN and ARCH. "Distribution Date" has the meaning assigned to such term in the ----------------- Distribution Agreement. 2 "Entity" shall mean any individual or person, or general partnership, ------ limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association, foreign trust or foreign business organization or government, or government organization, and the heirs, executors, administrators, legal representatives, successors, and assigns of the Entity when the context so permits. "Environmental Laws" means any and all applicable regulations, ------------------ ordinances, codes, licenses, permits, orders, approval, authorizations, requirements and similar items and any and all applicable judicial or administrative decrees, judgments or orders relating to the protection of human health or the environment or to the protection of the health and safety of employees and the public. "First Contract Year" means the period from the Distribution Date ------------------- until December 31, 1999. "Fixed Costs" means those costs which do not vary directly with units ----------- of production or usage, as further described in Section 5.01(b). "Force Majeure" means, for either Party, any circumstance(s) beyond ------------- the reasonable control of that Party, which prevents full performance, including, but not limited to: acts of God; fire; accident; flood; explosion; war; hurricanes; tornadoes; riots; government action or inaction or request of Governmental Authority, including any law, decree, order or regulation of any governmental agency or authority whether federal, state or local; strikes, lockouts or labor disputes; injunction; failure or delay of transportation; shortage of, or inability to obtain, supplies, equipment, fuel, power, labor or other operational necessity; failure of third party suppliers to furnish raw materials or services; or curtailment of power supply. "Governmental Authority" means any federal, state or local government, ---------------------- governmental authority, regulatory or administrative agency, governmental commission, board, bureau, court or tribunal or any other similar arbitral body. "Hours of Operation" means, for any Service, the days and times during ------------------ which a Service Provider is required to provide such Service and during which a Service Receiver shall accept such Service. "Party/Parties" means either ARCH or OLIN or both of them. ------------- "Prime Rate" means the rate of interest published in the Wall Street ---------- ----------- Journal under the title "Money Rates," and defined therein as being the base - ------- rate on corporate loans at large money center commercial banks (or if no longer published, an equivalent rate agreed by the Parties). 3 "Reasonable and Prudent Operator" means a person seeking to perform ------------------------------- its contractual obligations and in so doing and in the general conduct of its undertaking, exercising that degree of skill, diligence, prudence and foresight which would reasonably and ordinarily be expected from an experienced operator in substantial compliance with all applicable laws engaged in the same type of undertaking in the same locality and under the same or similar circumstances and conditions, and any reference to the standard of a Reasonable and Prudent Operator herein shall be a reference to such degree of skill, diligence, prudence and foresight as aforesaid. Notwithstanding the above, the term Reasonable and Prudent Operator does not imply a higher standard of care which may be applicable to commercial providers of a Service which a Party may provide under this Agreement. "Service" means the furnishing, supply, distribution and delivery of ------- each Service as set forth in Exhibit A hereto to be provided by or on behalf of --------- a Party pursuant to the terms and conditions of this Agreement. "Service Charges" shall mean the charges for a Service, comprised of --------------- Fixed Costs, Variable Costs and Capital Carrying Charges. "Service Facilities" means, on any date of determination, any asset ------------------ located at the Charleston Site used by the Service Provider on such date to provide Services to the Service Receiver. "Service Provider" shall mean the Party providing a Service hereunder. ---------------- "Service Receiver" shall mean the Party receiving a Service hereunder. ---------------- "Specification" means the Service Descriptions of the Service stated ------------- in the relevant section of Exhibit A, as those Service Descriptions may be --------- amended from time to time either in accordance with the terms of the relevant section of Exhibit A or by agreement in writing between the Parties. --------- "Term" means for any Service, the period in which the Service Provider ---- must provide a Service, commencing at the Distribution Date and continuing for the term set forth in Exhibit A for such Service. --------- "Utility Service" means the following Services: Electricity and --------------- Electricity Distribution, Steam, Water Supply System and Treatment of HAN Process Waste Water and HAN Area Storm Water. For purposes of the provisions of this Agreement, Utility Services are included in "Services." 4 "Variable Costs" means, for any Service, costs that vary directly with -------------- units of production, as further described in Section 5.01(a). "Willful Breach" consists of the following two elements: (a) a -------------- deliberate, volitional, non-coerced and non-accidental failure by a Party to provide a Service in accordance with this Agreement, which is not due to Force Majeure, and (b) the Party's failure, following written notice from the Authorized Representative of the Service Receiver to the Authorized Representative of the Service Provider, to immediately correct the failure in all material respects within five (5) business days after receipt of such notice. ARTICLE II PROVISION OF SERVICES --------------------- 2.01 Undertaking to Provide Services ------------------------------- Each Service Provider shall provide or cause the Services to be provided to the other Party, and shall act as a Reasonable and Prudent Operator with respect to its provision of Services (or, subject to the provisions of Section 2.05, shall act as a Reasonable and Prudent Operator with respect to its efforts to arrange for one or more third parties to provide Services), in accordance with the terms and conditions set forth in this Agreement, including, without limitation, the service standard provisions set forth in Section 2.02. 2.02 Service Standard ---------------- (a) The Parties agree that a Service Provider's sole obligation and undertaking with respect to the provision of Services pursuant to this Agreement shall be to act as a Reasonable and Prudent Operator upon the terms and conditions set forth herein. Further, the Service Provider shall only be liable to the Service Receiver for Willful Breaches of that standard. (b) The Service Provider shall initially provide Services to the Service Receiver on substantially the same basis, and under substantially the same terms and conditions as the Service Provider provides to its own operations and such Services were provided at the Charleston Plant prior to the Distribution Date. Thereafter, the basis for provision of Services may reflect such non-material changes as occur in the ordinary course of business, but any material changes (i.e. changes which may have any impact on the Service Receiver operations, or ---- may increase the cost thereof), must be approved in advance by the Service Receiver, such approval not to be unreasonably withheld. (c) No changes in the Specifications of any of the Services may be made without the written consent of both the Service Provider and Service Receiver. The Parties, however, can 5 mutually agree to supply and receive Services which do not accord with the Specifications, provided each such variation is agreed in writing. In the event a Service Provider anticipates Specifications hereunder may not be met, it shall promptly notify the Service Receiver. (d) Each Party shall act as a Reasonable and Prudent Operator in the operation, maintenance or modification of the Service Facilities and equipment. 2.03 Services Quantities ------------------- (a) Subject to the terms of this Agreement, a Service Provider shall provide each Service to the Service Receiver at the quantity requested by the Service Receiver up to its Budgeted Service Quantity. (b) Not later than August 31, 1999 and August 31 of each Contract Year thereafter, the Service Receiver shall give to the Service Provider a written notice setting forth the quantity of each Service requested by the Service Receiver for the next succeeding Contract Year. Not later than sixty (60) days after receiving such notice, the Service Provider and the Service Receiver will agree, acting in good faith and based on reasonably determined future projections, on the Budgeted Service Quantity to be made available to the Service Receiver and the estimated charges therefor. For calendar year 1999 the Budgeted Service Quantities for each Party shall be as stated in the 1999 Charleston Plant budget. (c) If during any Contract Year the Service Receiver requests Services in excess of the Budgeted Service Quantity, the Service Provider shall provide such excess Services if unused capacity exists. In such case, the Fixed Cost component of the Service Charge will be reset for the balance of the Contract Year to reflect properly the annualized Fixed Cost component of the Services, including the Services provided in excess of the Budgeted Service Quantity. (d) If either Party requires increased Services to meet the need of its expanded operating facilities, and unused capacity exists, the Service Provider shall make such unused capacity available to the Party first requesting the increased Services. If both Parties require and request a portion of unused capacity, and their combined request exceeds the amount of unused capacity existing at that time, the Service Provider will allocate the available unused capacity to each Party on the basis of each Party's percentage use of the Service. 2.04 Measurements ------------ (a) Measurements of the levels and quantities of Services to be provided to Service Receiver shall be undertaken in accordance with the practices in effect at the Charleston Site on the Distribution Date. In the event either Party should desire additional or improved system of meters, weights and measures, then the Parties shall meet and discuss the implementation of such 6 request. Unless otherwise agreed, the requesting Party shall pay all expenses related to the acquisition and installation of such improvements, and any increased cost of operations. (b) In the case of Services using meters to measure quantity: (i) the Parties agree that the Party owning the meters shall bear all costs of calibration except when the Party that does not own the meter requests that a calibration be performed at a time other than at the agreed upon interval and, upon such calibration, it is determined that the reading was within the stated range of accuracy of that meter. (ii) If discrepancies in excess of 5% are determined between the sum of the actual readings of all of Service Receiver's operations receiving a Service at the Charleston Site and the meter reading at the output source of the Service, the Service Receiver shall be due a credit or debit against prior deliveries of that quantity of the Service determined by multiplying the total discrepancy (expressed as a percentage) by all quantities of such Service delivered to the Service Receiver during the period within which such discrepancy existed; provided that if such -------- period cannot reasonably be determined, then such period shall be deemed to be equal to one-half of the number of days between the date of the last meter calibration and the date on which such calibration was corrected. (c) From time to time, as agreed by the Parties, each Party shall permit the other Party (or its agents or representatives) to visit its relevant facility or equipment at the Charleston Site in order to witness meter calibrations, tank strappings or other tests to be conducted to verify the accuracy of equipment used to determine the quantity of Services provided by or on behalf of a Service Provider to a Service Receiver; provided that (i) such calibrations and tank strappings or other tests shall not occur more frequently than every thirty (30) days, and (ii) each Party shall cause its employees, agents and representatives to comply with all of the other Party's rules and regulations and follow designated routes. The Party responsible for taking the measurement will provide the other Party with two (2) business days' notice of such calibrations, tank strappings or tests. (d) If at any time any of the measuring devices are out of service, the Party responsible therefor will make available to the other Party the relevant data from up-stream or down-stream meters or measures or from elsewhere to enable the Parties to determine or estimate as accurately as possible the appropriate charges to be made while such meters or measures are out of service. 7 2.05 Entities to Provide Services ---------------------------- (a) All Services shall be provided by employees of the Service Provider or, at the Service Provider's election, by third parties with whom it has contracted to provide such Services to itself. All references in this Agreement to a Service Provider's "providing" a Service shall include both direct Service provision by the Service Provider and Service provision by third parties. (b) Notwithstanding (a) above, in the event that a Service Provider elects to utilize a third party to provide a Service and such third party supplier did not provide such Service at the Charleston Site as of the Distribution Date, then the Service Provider shall notify the Service Receiver in advance, which notice shall include the terms on which the third party supplier will be providing the Service, and the Service Receiver may elect either to receive the affected Service to be provided by a third party supplier or terminate the affected Service upon thirty (30) days written notice. (c) All contracts with third party suppliers must contain appropriate indemnities and insurance requirements of the third party supplier, and must exclude liability of the Service Provider and the Service Receiver for any punitive, special, indirect, or consequential damages, or lost profits or business interruption, incurred by the third party supplier. 2.06 Warranties ---------- (a) The Service Provider warrants to the Service Receiver that the Services delivered pursuant to this Agreement will meet the Specifications in Exhibit A --------- hereto except in the case of Services purchased by the Service Provider where the Service as supplied by a third party supplier is not within the applicable specifications, in which case Section 2.06(c) shall apply. (b) The Service Receiver may refuse to accept or may reject any Service which does not conform with the relevant Specification and shall notify the Service Provider in writing within thirty (30) days after the receipt of such non-conforming Service, in which case, the Service Provider shall at the Service Recipient's option, either: (i) provide the Services again in replacement for the non-conforming Service, or (ii) issue a credit to the Service Recipient for the Service Charge allocable to such non-conforming Service. Failure to give such notice shall constitute a waiver by the Service Receiver of all claims with respect to the non-conforming Service. (c) In the event that a third party supplier to the Service Provider supplies any Service and that Service does not meet the Specification, then the Service Provider shall: (i) notify the Service Receiver forthwith upon becoming aware that the Service is outside the Specification, (ii) use reasonable efforts to work with the Service Receiver and the third party supplier to bring 8 the Service within Specification, and (iii) provide the Service Receiver with full cooperation in pursuing a Claim against the third party supplier. To the extent that the Service Provider has complied with Section 2.05 and this Section 2.06(c), the Service Provider shall have no further liability in respect of any Service supplied hereunder by a third party supplier which fails to meet the Specification in the circumstances set out in this Section 2.06(c). (d) EXCEPT FOR THE EXPRESS WARRANTIES ABOVE, SERVICE RECEIVER AND SERVICE PROVIDER MAKE NO OTHER WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES PROVIDED OR PRODUCT(S) MADE UNDER THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 2.07 Risk of Loss - Title -------------------- Liability associated with and, as appropriate, title to, any Service supplied hereunder shall pass to the Service Receiver at the point at which the Service is received by the Service Receiver (i.e., comes under the operational --- control of the Service Receiver, as applicable). Before such point, the risk of loss remains with the Service Provider. Except in the case of gross negligence by either the Service Provider or Service Receiver, employees of each shall utilize the applicable Workers Compensation program of their respective employer as exclusive remedy. 2.08 Monthly Meetings ---------------- The Parties' Authorized Representatives, or such other person(s) a Party may designate, shall meet monthly, or more often as may be required, to review the Services being provided, the Service Charges for such Services, the next ninety (90) days' projected requirements for Services and other related items. Such a meeting of the Parties' Authorized Representatives will also be held during the annual Budgeted Service Quantity meeting. 2.09 Regulatory Approvals -------------------- The Service Provider shall endeavor to obtain all contract modifications, permits, licenses and other authorizations from Governmental Authorities needed to operate the Service Facilities and provide the Service Receiver with the Services listed in Exhibit A. However, the Service Provider --------- shall not be liable to the Service Receiver for any failure to provide the Services if such failure is attributable to any delay or inability in obtaining the necessary contract modifications or in obtaining the necessary permits, licenses or authorizations from Governmental Authorities. 9 ARTICLE III SERVICE FACILITIES ------------------ 3.01 Expansion / Improvement of Service Facilities --------------------------------------------- (a) The Parties recognize that normal operations of the Service Facilities require some ongoing level of capital improvement and expenditures. Also capital improvements and expenditures may be required to meet local, state or Federal regulations. To the degree that these expenditures are required to maintain and operate the Service Facilities to the benefit of all the Service users, the funding for such capital improvements shall be the responsibility of the Service Provider. The Service Receiver will be obligated to participate in these capital improvements and expenditures but will have the option of funding its share of the capital expenditures, in which case the charges associated with the capital improvement and expenditures will not be included in Capital Carrying Charges and the Service Provider will not charge the Service Receiver for depreciation. If the Service Receiver elects to fund its share of the capital improvement and expenditure, its share will be based upon its percentage usage or consumption during the past twelve (12) months. If, however, the Service Receiver elects not to fund its share of the capital expenditure, it will be charged start-up costs and on-going depreciation and Capital Carrying Charges based upon its Budgeted Service Quantity Percentage in future years. (b) To the extent that capital improvements and expenditures are known, they will be included in the annual capital budget by the Service Provider and reviewed at budget time with the Service Receiver. Individual projects included in the capital budget with costs totaling less than Two Hundred Thousand Dollars ($200,000) will be performed at the sole discretion of the Service Provider, provided that the sum total of all such projects for an individual Service does not exceed Six Hundred Thousand Dollars ($600,000) in any one calendar year. For a project totaling less than Two Hundred Thousand Dollars ($200,000) but not included in the annual capital budget, the Service Provider, after reviewing the project with the Service Receiver, may proceed at its sole discretion with implementation of the project provided that the aggregate sum of all projects applicable to that particular Service does not exceed Six Hundred Thousand Dollars ($600,000) for that calendar year. (c) For capital improvements and expenditures in excess of Two Hundred Thousand Dollars ($200,000) for any single project or the aggregate sum of such projects exceeding Six Hundred Thousand Dollars ($600,000) for a particular Service during a Contract Year, the Service Provider will review such capital improvements and expenditures with and receive the approval of the Service Receiver. 10 (d) To the extent that capital investment for the improvement or expansion of the Service Facilities are made to meet a specific need of either the Service Provider or the Service Receiver then the Party whose needs are being met will be responsible for funding such capital improvements and expenditures and all operating costs associated with such capital investments. (e) If the Service Provider identifies a capital expenditure it considers will provide sufficient cost savings to justify the expenditure, then the Service Receiver will be asked to fund the expenditure in proportion to the Service Receiver's consumption of such Service during the previous twelve (12) month period. If the Service Receiver decides not to participate in the cost saving project and the Service Provider proceeds with the project, then no Capital Carrying Charges for such cost savings project will accrue to the Service Receiver, and only the Service Provider shall receive the benefit of any cost savings achieved from the project. The Service Charge for the Service to the Service Receiver, if it decides not to participate in the project, shall be computed to reflect the costs that the Service Provider would have incurred in providing the Service had the cost saving project not been done. (f) The Service Receiver also shall have the right to identify cost savings projects and if the Service Provider elects not to participate in such projects, the Service Receiver can direct that the Service Provider implement the projects with funding by the Service Receiver and all cost benefits accruing exclusively to the Service Receiver. 3.02 Unused Service Assets, Land --------------------------- (a) If the Service Provider's operations at the Charleston Site no longer require the provision of a Service, the Service Provider shall make available for purchase by the Service Receiver the assets providing such Service at the Service Provider's net book value of the assets. (b) Each of the Parties agrees that as and when requested by the other Party, it shall consider in good faith, without creating a binding obligation hereunder, the sale of unused land by it to the requesting Party for expansions, improvement of operations, safety and environmental concerns and other matters. 3.03 Rights of Way, Easements ------------------------ Each of the Parties agrees to grant to the other Party such temporary or permanent rights of way, easements or access licenses, on mutually satisfactory and commercially reasonable terms, for pipelines, communication lines and transportation access that may be reasonably required by the other Party for movement of raw materials and finished products; provided that such rights of way, easements or access licenses do not interfere with the granting Party's operations, and do not in any way impair the value of the granting Party's property. In no event will the foregoing sentence obligate the granting Party to make any grant or agreement which 11 will cause it to be in breach of any agreement to which it is a party or its assets or bound, or violates any law, rule or regulation of a Government Authority applicable to the Charleston Site. 3.04 Relocation of Service Facilities -------------------------------- Each Party shall have the right to relocate utilities and other equipment, property or assets in order to accommodate plant expansions, construction of new facilities, or the need to obtain Services by alternate means; provided that such relocation shall not impair or add costs to the other Party's operations at the Charleston Site. In the event that such relocation will cause an increase in the Service Charge for the affected Service, then the Party effecting the relocation shall be responsible for such increase. ARTICLE IV TERM AND TERMINATION -------------------- 4.01 Term of Agreement ----------------- This Agreement shall become effective on the Distribution Date and shall continue in full force and effect for an initial term of ten (10) years and shall continue evergreen thereafter from year to year until all Services have been terminated pursuant to Section 4.02 below. 4.02 Duration of Services -------------------- (a) The Service Provider will provide each Service for the Term described for such Service on Exhibit A. The Service Receiver will accept each Service --------- for any minimum period specifically provided for such Service in Exhibit A, if --------- any, and thereafter until such time as the obligation to accept a Service is terminated in the manner set forth in subsection (b) below. (b) The Service Receiver may terminate a Service, upon such notice as is set forth in the relevant section of Exhibit A, or if none is specified as to --------- the Service Receiver, upon one year's advance written notice. (c) After the expiration of the Term for a Service, the Service Provider may terminate the provision of such Service, upon such notice as is set forth in the relevant section of Exhibit A, or if none is specified as to the Service --------- Provider, upon one (1) year's advance written notice; provided however, a Service Provider may not terminate a Utility Service for so long as it provides such utilities for its own operations or to any other Entity conducting operations at the Charleston Site. 12 (d) From and after the Service termination date, all Service Charges associated with such Service shall cease to occur, and neither Party shall have an obligation to further provide or to accept such Service. ARTICLE V PAYMENTS FOR SERVICES --------------------- 5.01 Services Charges ---------------- The Service Charges for Services provided by the Service Provider to the Service Receiver shall include three (3) components: (1) Variable Costs; (2) Fixed Costs; and (3) Capital Carrying Costs. (a) Variable Costs cover the costs that vary in proportion to the amount of Service being provided, as defined at the Charleston Plant immediately prior to the Distribution Date (unless otherwise agreed by the Parties), and are expressed in terms of dollars per unit of production of such Service. Actual unit costs of production for the Charleston Site and actual volumes of consumption by the Service Receiver will be used to compute the monthly Variable Cost Service Charge to the Service Receiver. (b) Fixed Costs cover the costs of providing a Service which do not vary in proportion to the amount of Service, as defined at the Charleston Plant immediately prior to the Distribution Date (unless otherwise agreed by the Parties), and shall cover such costs, without limitation, as operating labor, maintenance labor, maintenance materials and contracts, laboratory, technical and environmental support costs, depreciation, taxes and administrative costs. Monthly Fixed Cost Service Charges to a Service Receiver will be based upon total budgeted Fixed Costs for the Service multiplied by the Service Receiver's Budgeted Service Quantity Percentage for the Service, adjusted semi-annually to actual Fixed Costs as provided in Section 5.02(a) below. (c) Capital Carrying Charges will apply to new capital investments made by the Service Provider after the Distribution Date, and will consist of all costs incurred by the Service Provider to make the capital investment for the Service and properly accounted for as capital expenditures. The Capital Carrying Charge will apply during the normal depreciation period for the investment and will be at Prime Rate plus two (2) percentage points. The formula for allocating Capital Carrying Charges properly chargeable to the Service Receiver will be: Monthly Charleston Site Capital Carrying Charges X Budgeted Service Quantity Percentage 13 (d) All labor charges included in Service Charges shall be charged at the fully loaded rate, which shall include wages/salary, fringe benefits, and as applicable, supervision and a cost for equipment and tools required to perform the Service. 5.02 Adjustments ----------- (a) The Fixed Costs reflected in the Service Charges paid monthly for each Service will be adjusted semi-annually to reflect actual Fixed Costs incurred for the period January through June, and for July through December, which adjustments shall be included on the next invoice issued thereafter. (b) If during any Contract Year, the Service Receiver's consumption or use of a Service exceeds its Budgeted Service Quantity by more than 5%, the Service Provider may, at its option, at the end of the Contract Year, bill a Fixed Cost adjustment to the Service Receiver. If the Service Receiver, during any Contract Year, consumes or uses less than the Budgeted Service Quantity, the Service Receiver still will be responsible for its portion of the Site's Fixed Costs and Capital Carrying Charges based upon its Budgeted Service Quantity, unless prior arrangements have been made for the Service Provider to take and consume or utilize the Service Receiver's planned consumption and to pay the Fixed Costs thereon. (c) In the event of Force Majeure preventing the delivery of a Service to the Service Receiver, the Service Receiver will continue to pay its proportionate share of Fixed Costs and Capital Carrying Charges for a period up to six (6) months, but payment of such Fixed Costs and Capital Carrying Charges will abate after six (6) months for the duration of the Force Majeure. (d) During other interruptions of a Service, the Service Receiver will continue to pay its share of the Fixed Costs and Capital Carrying Charges of the Service, however, in the event of a breach of this Agreement by the Service Provider that results in the cessation of the Service, the Service Receiver will not have any obligation to pay the Fixed Costs and Capital Carrying Charges of that Service until the Service is resumed. 5.03 Invoicing and Payment --------------------- (a) The Service Provider shall issue an invoice with reasonable detailed support to the Service Receiver at the end of each month indicating the quantity of Services received and the Service Charges for such Services. Payment by the Service Receiver for Services received shall be due fifteen (15) days after the date of the invoice. 14 (b) In the event the Service Receiver disputes the accuracy of any invoice, the Service Receiver shall pay the undisputed portion of such invoice and the Parties will promptly meet and seek to resolve the dispute. (c) If the Service Receiver fails to pay any undisputed amount owed under this Agreement, Service Receiver shall correct such failure promptly following notice of the failure, and shall pay Service Provider interest on the amount paid late at two percent (2%) above the Prime Rate prorated for the number of days such overdue amounts are outstanding. (d) All payments due under this Agreement shall be made by electronic funds transfer, unless otherwise agreed by the Parties. 5.04 Taxes ----- To the extent not included in the price Service Provider charges for Services, Service Receiver shall pay to Service Provider the amount of any taxes or charges set forth in (a) through (c) below imposed now or in the future by any Governmental Authority including any increase in any such tax or charge imposed on Service Provider after the Distribution Date: (a) Any applicable sales, use, gross receipts, value added or similar tax that is imposed as a result of, or measured by, any sale or Service rendered hereunder unless covered by an exemption certificate; (b) Any applicable real or personal property taxes, including any special assessments, and any impositions imposed on Service Provider in lieu of or in substitution for such taxes on any property used in connection with any sale or Service rendered hereunder; and (c) Any other governmental taxes, duties, and/or charges of any kind, excluding any income or franchise taxes imposed on Service Provider, which Service Provider is required to pay with respect to any sale or Service rendered hereunder. 5.05 Advance Payments ---------------- Prior to the Distribution Date both Parties jointly will determine and agree on whether an advance payment may be required by one Party to the other under this Services Agreement, to compensate either Party for carrying costs associated with any imbalance in cash disbursements in providing Services hereunder. 15 ARTICLE VI SHUTDOWNS; FORCE MAJEURE ------------------------ 6.01 Maintenance, Planned and Unplanned Temporary Shutdowns ------------------------------------------------------ (a) Each Party will maintain the Service Facilities to the same standards in effect at the Charleston Plant immediately prior to the Distribution Date, which shall include at all times such maintenance as required to comply with all applicable laws, rules and regulations of a Governmental Authority. (b) Each Party shall have the right and freedom to temporarily shutdown its own facilities used for the production, distribution, supply or receipt of Services as well as facilities supportive of such activities in the event of Force Majeure circumstances or to ensure their continued safe and efficient operation. (c) The Parties shall use all reasonable efforts to minimize interruptions in the supply and receipt of Services hereunder and to mitigate the consequences for the other Party of any interruptions arising from shutdowns. (d) The Parties shall provide each other at least prior notice of any planned shutdown, as soon as such schedule is established, but in no event less than three (3) months in advance. The Authorized Representatives shall meet and seek to coordinate such planned temporary shutdown, but the final decision on the period(s) of any shutdown(s) shall be for the Party owning the facility to be shut down, provided, however that no planned shutdowns expected to lead to interruptions of supply, or the receipt of Services in the aggregate exceeding fourteen (14) days per calendar year, shall be made unless otherwise agreed by the Parties. (e) In the event of an unplanned shutdown, the Party whose facility is to be shut down must inform the other Party with as much notice as reasonably practicable of its unplanned shutdown, of the expected commencement date and extent of the shutdown, and plans for any partial and full resumption of supply or receipt of the Service concerned. (f) In the event of an emergency temporary shutdown, the Party whose facility is concerned must inform the other Party as soon as reasonably practicable and the Parties will cooperate fully to minimize the consequences and risks, and to mitigate any losses. (g) In the event that a planned or unplanned shutdown of a Service Facility results in a reduction of the Service that is available, the available Service will be apportioned between the Parties in accordance with the Curtailment Plan for such Service, or in the absence of an 16 applicable section for the Service in the Curtailment Plan, based on usage or as otherwise agreed by the Parties as being most practicable. The Service Provider shall use its best efforts to restore the Service to full capacity as soon as possible and minimize the Service Facility shutdown. (h) Unplanned or emergency shutdowns causing interruptions of supply for more than seven (7) days shall be deemed a case of Force Majeure. 6.02 Force Majeure. ------------- (a) A Party's failure or inability to comply with the terms of this Agreement shall not provide a basis for such party's liability to the other party in the event performance is prevented by any Force Majeure event, provided that such Party complies with its obligations under this Section 6.02. (b) If a party is in a position of Force Majeure or is aware of the likelihood of a situation constituting Force Majeure, it shall notify the other party in writing promptly of the cause and extent of such non-performance or likely non-performance, the date or likely date of commencement thereof, the expected duration and estimated effect, and the means proposed to be adopted to remedy or abate the Force Majeure; and the Parties shall without prejudice to the other provisions of this Section 6.02 consult with a view to taking such steps as may be appropriate to mitigate the effects of such Force Majeure. (c) The party subject to Force Majeure shall act as follows: (i) The affected party shall coordinate closely with the other party, shall keep the other party regularly informed during the course of the Force Majeure as to when resumption of performance shall or is likely to occur, and shall use all reasonable efforts to remedy or abate the Force Majeure as expeditiously as possible; provided, however, nothing herein shall require a Party to settle or compromise any strike or labor dispute. (ii) In the case of a Force Majeure affecting the Service Provider, the Service Provider will allocate such portions of the affected Services that are available to ensure safety, health and environmental compliance at the Charleston Site, such that after the allocation the Service Receiver will receive the Service in accordance with the Curtailment Plan, or if not provided for therein, based on the usage level of such Service by said facilities as a percentage of the total for the Charleston Site. (iii) The affected party shall notify the other party and shall resume performance as expeditiously as possible after termination of the Force 17 Majeure or the Force Majeure has abated to an extent which permits resumption of such performance. (d) Upon the occurrence and during the continuance of a Force Majeure, a Service Receiver shall be entitled to obtain substitute Services on a temporary or permanent basis as set forth in this paragraph. The Service Provider shall cooperate with the Service Receiver's efforts to obtain temporary substitute Services, including allowing a responsible third party to have reasonable access to the Charleston Site and the Services Facilities to allow for delivery of such Services. In the event of a Force Majeure event which has a continuous duration of six (6) months or more, the Service Receiver shall be entitled to obtain permanent substitute Services. In such case the Service Provider will have no further obligation to provide and the Service Receiver shall have no further obligation to accept such Service or Services and all costs associated with such Service shall cease to accrue on the later of: (i) the thirtieth (30th) day after the date on which the Service Receiver notifies the Service Provider that it intends to exercise its right to obtain permanent substitute Services and (ii) any later date of termination specified in such notice. ARTICLE VII LIMITATION OF LIABILITY ----------------------- 7.01 Limitation of Liability. ----------------------- The Parties shall have no liability to each other for any and all Claims and/or Damages arising out of this Agreement, whether such Claims and/or Damages arise on account of a Party's furnishing Services hereunder, the failure to furnish Services hereunder, or otherwise, and whether or not such Claims and/or Damages were caused by the negligence of a Party, including a Party's sole negligence; provided, however, that the foregoing limitation shall not apply to Claims and/or Damages to the extent caused by a Party's gross negligence or Willful Breach. 7.02 Consequential Damages. --------------------- Notwithstanding anything to the contrary contained herein or at law and in equity, in no event (except in the case of Willful Breach) shall a Party be liable to the other Party for punitive, special, indirect or consequential damages (including, without limitation, damages for loss of business profits, business interruption or any other loss) arising from or relating to any claim made under this Agreement or regarding the provision of or the failure to provide Service(s) hereunder, even if a Party had been advised or was aware of the possibility of such damages. 18 7.03 Mitigation. ---------- OLIN and ARCH (as the case may be) shall use all reasonable efforts to mitigate the loss and damage (if any) incurred by it as a result of any breach by another Party of that other Party's obligations under this Agreement. ARTICLE VIII INDEMNIFICATION --------------- 8.01 Indemnification --------------- (a) ARCH shall indemnify, defend and hold harmless OLIN, including its affiliates, employees, representatives and agents (the "OLIN Indemnitees") from and against all Claims and Damages asserted by any third party or by ARCH employees (including their families and estates) against the OLIN Indemnitees in connection with, or as a result of, OLIN's provision of Services under this Agreement except to the extent such Claims and Damages are caused by the gross negligence or Willful Breach of any of the OLIN Indemnitees. (b) OLIN shall indemnify, defend and hold harmless ARCH, including its affiliates, employees, representatives and agents (the "ARCH Indemnitees") from and against all Claims and Damages asserted by any third party or by OLIN employees (including their families and estates) against the ARCH Indemnitees in connection with, or as a result of, ARCH's provision of Services under this Agreement unless such Claims and/or Damages are caused by the gross negligence or Willful Breach of any of the ARCH Indemnitees. (c) Each Party shall indemnify, defend and hold harmless the other Party from and against all monetary fines, penalties or the like, imposed by a Governmental Authority against the Party entitled to indemnification arising from a violation by the indemnifying Party of applicable laws, rules, regulations, orders, or the like of the Governmental Authority. 8.02 Third Party Service Provider ---------------------------- (a) Where a third party supplier provides a Service on behalf of the Service Provider hereunder and that third party (including its subcontractor, employee or agent) files Claims and/or Damages against either Party (or both Parties) relating to that third party's provision of Service, the Parties shall indemnify, defend and hold the other Party, its employees, representatives and agents, harmless with respect to such Claims and/or Damages as follows: 19 (i) OLIN shall indemnify, defend (or provide for the defense) and hold ARCH harmless from and against all third party supplier Claims made by a third party supplier which provides Services to ARCH on behalf of OLIN (including Claims and/or Damages of its subcontractor, employee or agent) and/or Damages which are alleged to occur in or on the Charleston Site, whether or not such Claims and/or Damages are based (in whole or in part) on the negligence of OLIN, ARCH or the third party supplier, except to the extent such Claims and/or Damages are caused by the gross negligence of ARCH; (ii) ARCH shall indemnify, defend (or provide for the defense) and hold OLIN harmless from and against all third party supplier Claims made by a third party supplier which provides Services to OLIN on behalf of ARCH (including Claims and/or Damages of its subcontractor, employee or agent) and/or Damages which are alleged to occur in or on the Charleston Site whether or not such Claims and/or Damages are based (in whole or in part) on the negligence of OLIN, ARCH or the third party supplier, except to the extent such Claims and/or Damages are caused by the gross negligence of OLIN. (b) In no event will an indemnitor be liable under paragraph (a) for punitive, special, indirect, consequential damages or lost profits or business interruption claimed by a third party supplier. 8.03 Indemnification Procedures. -------------------------- (a) In the event of any Claim for which a Party is entitled to indemnification, the Party seeking indemnification shall immediately notify in writing the indemnifying Party of such Claim and shall fully cooperate with the indemnifying Party in the defense of the Claim and, at the indemnifying Party's cost, permit the indemnifying Party's attorney(s), reasonable acceptable to the indemnified Party, to handle and control the conduct and defense, and/or settlement of such Claim, including making personnel and records available for the defense of the Claim. (b) The indemnifying Party shall keep the indemnitee(s) reasonably informed regarding any claim, action or proceeding in which the indemnifying Party is defending the indemnitee(s), and shall not enter into any settlement or compromise of such claim, action or proceeding affecting the indemnitee(s) without the indemnitee(s)'s consent, unless such settlement or compromise contains a complete and unconditional release of the indemnitee(s). In no event shall the indemnifying Party agree to a settlement which contains a non-monetary component without the consent of the indemnitee(s), which consent shall not be unreasonably withheld. 20 (c) The indemnification provisions of Sections 8.01 and 8.02 are contingent upon the indemnitee(s) promptly turning over the complete control of the claim and/or suit to the indemnifying Party. 8.04 Scope of Indemnification as Permitted by Applicable Law. ------------------------------------------------------- Nothing in this Article VIII shall be construed to violate directly or indirectly any applicable law prohibiting indemnification for the sole or partial negligence of the indemnitee. In the event any provision of this indemnity is contrary to applicable law, this indemnity shall not be void or unenforceable, but shall be enforced to, and only to, the fullest extent permitted by the applicable law. ARTICLE IX RECORDS AND AUDITS ------------------ 9.01 Records ------- (a) Each Service Provider shall maintain books of record and account, recording the levels or quantities of Services provided by or on behalf of the Service Provider to the Service Receiver under this Agreement, the costs and expenses associated therewith and amounts paid by the Service Receiver. (b) Each Service Provider agrees to maintain financial records consistent with its normal practices and that are adequate to reflect fairly the accuracy of charges invoiced under this Agreement. Should the Service Receiver reasonably request the Service Provider to develop or maintain additional records in connection with this Agreement, and if the Service Provider agrees, the cost of this effort will be negotiated by the Parties and borne by the Service Receiver. 9.02 Audits ------ (a) Third Party Audit (Cost of Service). From time to time as agreed by ----------------------------------- the Parties, each Party shall have the right to have an independent certified public accounting firm ("CPA firm"), mutually acceptable to the Parties, audit the other Party's books of account and other records pertaining to a dispute arising from the cost of Services (including invoiced and reimbursed costs) provided pursuant to this Agreement for a period of five (5) years following the end of the calendar year in which such disputed Services were rendered. Prior to commencing its audit, the CPA firm shall execute a confidential agreement reasonably acceptable to the audited Party. Upon completing its audit, the CPA firm shall report only 21 whether or not the charges from the Service Provider to the Service Receiver hereunder were correct or, if not, the amount of any overcharge or undercharge. The Parties agree to accept the determination of the CPA firm as binding and final, and if the audit determines that either Party owes money to the other Party, the owing Party shall promptly pay such sum to the other Party. The cost of such audit shall be borne by the requesting Party and shall be limited to a duration not to exceed two (2) months. (b) Functional Audit. From time to time as agreed by the Parties, the ---------------- Service Receiver shall have the right to conduct functional audits of a Service provided hereunder. Such audits shall be limited in scope to: (i) comparison against a mutually agreed upon standard, or (ii) as required to effect certification promulgated by a recognized industry organization (for example, "ISO" certification) or by a Governmental Authority. Each Party shall bear its own costs of any Functional Audits and such audits shall be limited to a duration not to exceed two (2) weeks on site. (c) Unrelated Information. Notwithstanding the above audit rights, the --------------------- Service Provider shall have the right to redact from records which may be audited information that is unrelated to the provision of Services to the Service Receiver. ARTICLE X INSURANCE, SAFETY, HEALTH AND ENVIRONMENT ----------------------------------------- 10.01 Insurance --------- (a) Each Party shall be responsible for maintaining insurance (which may include self insurance) in coverages and amounts sufficient to replace its own Service Facilities and production facilities, to cover potential liabilities hereunder, and otherwise to comply with all applicable requirements of Governmental Authorities. (b) Each Party shall look to its own insurance (including self insurance and any deductible amount) as its exclusive remedy to recover damages for property damage, business interruption or extra expenses relating to an insurable event. Each Party hereby waives its rights of recovery against the other for any loss insured by fire, extended coverage and other property insurance policies (including self insurance and any deductible amount) existing for the benefit of such Party. Each Party shall obtain from its insurer a waiver of subrogation against the other Party. 10.02 Safety, Health and Environment ------------------------------ 22 (a) Each Party shall be responsible for complying with Environmental Laws relating to the operation of its activities at the Charleston Site after the Distribution Date. Notwithstanding the above, a Party may contract out the record keeping and/or reporting activities required by any federal, state and local law, provided that the Party shall not contract away its liability and responsibility for assuring that any required records or reports comply with the legal requirements, and are truthful and accurate. (b) Unless otherwise agreed, each Party shall retain sole and complete responsibility for the management, storage and proper disposal of wastes, discharges and emissions in all media produced from its activities and shall obtain necessary Governmental Authority permits, permissions or licenses to effect this responsibility. (c) Each Party shall notify the other Party on a timely basis of any incidents or conditions which may have adverse safety, health or environmental consequences to employees or property of the other. Each Party shall provide information to the other Party for any hazardous materials to which their employees may be exposed while on the Charleston Site. (d) Either Party shall have the right to immediately suspend the provision of any Service under operation of this Agreement, without liability to itself by informing the Authorized Representative of the other Party as soon as practical by telephone followed by written notice, if at any time a Party believes, in its sole reasonable judgment, that an unsafe practice related to that Service, which endangers the employees of either Party, the general public, or the environment, is being undertaken. Further, if this practice is not corrected or substantial steps taken to effect its correction within fifteen (15) days, then that Party may declare Force Majeure and suspend its obligations in accordance with Section 6.02. ARTICLE XI DISPUTE RESOLUTION ------------------ 11.01 Alternative Dispute Resolution ------------------------------ (a) The Parties understand and appreciate that their long term mutual interests will be best served by effecting a rapid and fair resolution of any claims or disputes which may arise out of this Agreement or from any dispute concerning this Agreement's terms. Therefore, each Party agrees, to use its best efforts to resolve all such disputes as rapidly as possible on a fair and equitable basis. Toward this end, each Party agrees to develop and follow a process for presenting, rapidly assessing, and settling claims and other disputes on a fair and equitable basis. 23 (b) If any dispute or claim arising under this Agreement cannot be readily resolved by the Parties pursuant to Section 11.01(a), the Parties agree to refer the matter to the OLIN and ARCH Authorized Representatives which shall meet and attempt to resolve the dispute within thirty (30) days from the date the dispute was brought before its attention. (c) If any dispute or claim arising under this Agreement cannot be resolved pursuant to Section 11.01(b), the Parties agree to refer the matter to a panel consisting of one (1) senior executive from each Party for review and resolution. The senior executive shall not have been directly involved in the claim or dispute. A copy of the Agreement terms, relevant facts, areas of disagreement and a concise summary of basis of each side's contention will be provided to both executives who shall review the same, and attempt to reach a mutual resolution of the issue. The senior executives shall meet and attempt to resolve the dispute within thirty (30) days of their appointment. (d) If the dispute cannot be resolved by the senior executive panel pursuant to Section 11.01(c), then within ten (10) days after the end of the senior executives' conference the Parties will notify the Authorized Representatives in writing and within thirty (30) days therefrom either Party may refer the matter to arbitration for sole and final settlement by a board of three (3) arbitrators in accordance with the Commercial Arbitration Rules (the "Arbitration Rules") of the American Arbitration Association ("AAA"). (e) The Party electing arbitration shall notify the other Party in writing in accordance with the Arbitration Rules and such notice shall be accompanied by the name of the arbitrator selected by the Party serving the notice. The second arbitrator shall be chosen by the other Party, and a neutral arbitrator shall be chosen by the two arbitrators so selected. If a Party fails to select an arbitrator or to advise the other Party of its selection within thirty (30) days after receipt by such a Party of the notice of the intent to arbitrate, the second arbitrator shall be selected by the AAA. If the third arbitrator shall not have been selected within thirty (30) days after the selection of the second arbitrator, the appointment of the third arbitrator shall be made by the AAA. Arbitrators shall be selected taking into account their background in the chemical industry and familiarity with chemical production facilities, or other appropriate qualifications. (f) All such proceedings shall be conducted in Norwalk, Connecticut or another mutually agreed upon location. The arbitrators shall make detailed findings of fact and law in writing in support of the decision of the arbitrator panel, but shall not be empowered to award reimbursement of attorneys' fees and other costs of arbitration to the prevailing Party. Any monetary award of the arbitrators panel shall include interest from the date of any breach or any violation of this Agreement. The arbitrators shall fix an appropriate rate of interest from the date of the breach or other violation to the date when the award is paid in full. The Parties agree that the decision of the arbitrators shall be final and conclusive and that judgment on the arbitration award may be entered in any court having jurisdiction over the Parties or their assets. 24 (g) The provisions of this Section 11.01 shall not be deemed to preclude any Party hereto from seeking preliminary injunctive relief to protect or enforce its rights hereunder, or to prohibit any court from making preliminary findings of fact in connection with granting or denying such preliminary injunctive relief, or to preclude any Party hereto from seeking permanent injunctive or other equitable relief after and in accordance with the decision of the arbitrator panel. Whether any claim or controversy is arbitrable or litigable shall be determined solely by the arbitrator panel pursuant to the provisions of this Section 11.01. 11.02 Ongoing Obligations. ------------------- It is expressly agreed that the failure of the Parties to resolve a dispute on any issue to be resolved hereunder shall not relieve either Party from any obligation set forth in this Agreement. In addition, the Parties expressly state their mutual determination that the failure to resolve any such disputes shall not hinder or delay the providing of the Services, and that, notwithstanding the pendency of any such dispute, neither Party will be excused of its obligations hereunder to cooperate with the other to effectuate the purposes of this Agreement. ARTICLE XII CONFIDENTIALITY --------------- 12.01 Confidentiality Obligation. -------------------------- Each of the Parties agrees to keep confidential and neither disclose to others nor use, except as permitted herein, any Confidential Information received from the other Party pursuant to this Agreement. In the event that the Service Provider elects to use a third party supplier to provide the Service, the Service Provider shall require that the third party supplier be bound by these provisions of confidentiality in its provision of Services. 12.02 Limits on Disclosure. -------------------- The receiving Party shall treat all Confidential Information in the same manner and with the same degree of care as it uses with respect to its own Confidential Information of like nature, except that the obligations set forth herein shall not apply with respect to any Confidential Information which: (i) Public Knowledge. Is generally available to the public or ---------------- subsequently becomes generally available to the public through no breach by the receiving Party of secrecy obligations under this Agreement or prior 25 agreements between the Parties concerning the Confidential Information; or (ii) Received from Third Party. Is received from a third party ------------------------- who is legally free to disclose such Confidential Information and who did not receive such Confidential Information in confidence from the disclosing Party; or (iii) Independently Developed. Is independently developed by the ----------------------- receiving Party without reference to the Confidential Information received from the disclosing Party. 12.03 Subpoena or Demand. ------------------ A Party may disclose Confidential Information pursuant to a subpoena or demand for production of documents in connection with any suit or arbitration proceeding, any administrative procedure or hearing before a governmental or administrative agency or instrumentality thereof, or any legislative hearing, or any governmental audit or other similar proceeding, provided that the receiving Party shall promptly notify the disclosing Party of the subpoena or demand and provided further that in such instances, the Parties use their reasonable best efforts to maintain the confidential nature of the Confidential Information by protective order or other means. ARTICLE XIII MISCELLANEOUS ------------- (a) Waiver. Neither Party shall be construed to have waived any of its ------ respective rights or interests in this Agreement by a failure, in any one instance, to have asserted, or made claim on, such right at the time such Party was entitled to assert same. (b) Assignment. Neither Party shall assign this Agreement without the ---------- prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed; provided, however, that ARCH or OLIN may assign its rights and obligations under this Agreement in whole or in part without consent to (i) any wholly owned subsidiary of ARCH or OLIN, so long as the performance of such subsidiary is guaranteed by ARCH or OLIN, as the case may be, or (ii) in connection with a sale by ARCH of all or substantially all of the business conducted by ARCH at the Charleston Site, or by OLIN of all or substantially all of the business conducted by OLIN at the Charleston Site. Nothing in this Agreement, express or implied, is intended to confer any rights or remedies under this Agreement on any person or entity other than ARCH or OLIN and their respective successors and permitted assigns. 26 (c) Notices. Unless otherwise provided for herein, all notices or other ------- communications authorized or required between the Parties hereto by any provision of this Agreement shall be in writing and delivered by hand, by national overnight courier or transmitted by registered or certified mail, return receipt requested, postage prepaid, and in all cases addressed to the respective Parties, at the address set forth below or such other address as may be designated by the Parties hereto. If to ARCH: Arch Chemicals, Inc. 1186 Lower River Road P.O. Box _______ Charleston, TN 37310-____ Attn: Plant Manager If to OLIN: Olin Corporation 1186 Lower River Road P. O. Box 248 Charleston, TN 37310-248 Attn: Plant Manager Unless otherwise provided herein, the date of receipt (or refusal to receive) shall be deemed to be the date the notice is given. (d) Modification; Entire Agreement. This Agreement (including the exhibits ------------------------------ and schedules referred to herein) represents the entire agreement of the Parties with respect to the matters discussed herein, and supersedes all prior agreements and understandings, oral and written, between the Parties with respect to the subject matter herein. There shall be no modification, amendment, change, or alteration of this Agreement unless reflected in a written instrument executed by both Parties. (e) Captions. Titles or captions of articles and sections contained in -------- this Agreement are inserted only as a matter of convenience and for reference, and in no way define, limit, extend, or describe the scope of this Agreement or the intent of any provision hereof. (f) Governing Law. This Agreement shall be governed by and construed ------------- according to the laws of the State of Connecticut without regard to its conflict of law provisions. 27 (g) No Public Utility. It is understood that neither Party hereto ----------------- considers itself or the other Party to be a public utility, and neither Party intends by this Agreement to engage in the business of being a public utility, or to enjoy any of the power and privileges of a public utility or by its performance of its obligations to dedicate to public or quasi-public use or purpose any of the facilities which it operates, and the Parties agree that the execution of this Agreement shall not, nor shall any performance or partial performance, be or ever deemed, asserted or urged by the Parties to be a dedication to public or quasi-public use of any such facilities of a Party, or as subjecting a Party to any jurisdiction or regulation as a public utility. If at any time an Entity or a Governmental Authority should initiate any action claiming or asserting jurisdiction over a Party as a public utility, or shall take jurisdiction in any proceeding whereby any Entity should assert or claim that a Party is a public utility because of the provision of a Service which is the subject of this Agreement, the Service Provider shall have the right to terminate the supply of the Service under this Agreement without penalty or further obligation to the Service Receiver at any time thereafter by giving ninety (90) days written notice to the Service Receiver of its intention to do so. (h) Relationship of Parties. In all matters relating to this Agreement, ----------------------- both Parties will be acting solely as independent contractors and will be solely responsible for the acts of their employees, officers, directors, and agents. Employees, agents, or contractors of one Party shall not be considered employees, agents, or contractors of the other Party. Neither Party shall have the right, power, or authority to create any obligation, express or implied, on behalf of the other Party. (i) Compliance. In performing its obligations, each Party will comply with ---------- all federal, state and local laws, ordinances, tariffs, and regulations of Governmental Authorities applicable to such Party. (j) Severability. In the event that any provision of this Agreement shall ------------ be found to be void or unenforceable, such findings shall not be construed to render any other provision of this Agreement either void or unenforceable, and all other provisions shall remain in full force and effect unless the provisions which are invalid or unenforceable shall substantially affect the rights or obligations granted to or undertaken by either Party. (k) Survival of Certain Provisions. The Parties expressly agreed that ------------------------------ Article V (Payments for Services); Article VII (Limitation of Liability); Article VIII (Indemnification) and Article X (Safety, Health and Environment) shall survive any termination or expiration of this Agreement. 28 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be execute by their duly authorized representatives as of the day and year first above written. OLIN CORPORATION By:_________________________ Title:______________________ ARCH CHEMICALS, INC. By:_________________________ Title:______________________ 29 EXHIBIT A --------- SERVICE: Electricity and Electricity Distribution PROVIDER: OLIN SERVICE DESCRIPTION . OLIN will transmit annually to ARCH approximately 83,800MKWH of 13.2KV, three phase, AC power for use in the existing ARCH facilities. OLIN will make all arrangements with the power supplier for delivery of electricity to the site. . AC power will be made available to ARCH at the load sides of Switchgear #1 and #19. ARCH will own HTH Feeder Lines #1 and #2 which feed power to Switchgear #4 and #18 for further distribution through unit substations to the ARCH operating units. . ARCH will own and maintain all the electric power distribution system from the load sides of Switchgear #1 and #19 to the operating units. . Any modifications to the ARCH power distribution system require OLIN approval. ARCH will operate the ARCH power distribution system in a manner approved by OLIN. Any reasonable recommendations with regard to reliability, power factor control, system coordination, engineering standards, operating and maintenance practices, etc. made by OLIN to ARCH must be implemented by ARCH in the time frame reasonably required by OLIN. . ARCH will notify OLIN immediately of any load changes in ARCH's AC power requirements. SERVICE CHARGE . OLIN will bill ARCH monthly for AC electric power actually used (expressed in MKWH) by ARCH and at a weighted average rate of all elements of the power bill (including the firm, LIP and ESP rates for the total of AC and DC Charleston Site power purchases from TVA for the month) as billed to OLIN by TVA. . The AC electric power used monthly by ARCH will be the sum of the meter readings expressed in MKWH, at unit substations Nos. 9, 10, 11, 16, 17, 18, 19, 27, 28, 36, 37, 38, 39, 34 and 35. 30 . OLIN will bill ARCH a flat sum of $1,600 per month to cover ARCH's allocation of costs for routine maintenance and repairs to the incoming plant power line and to Switchgear #1 and #19. The cost of any major repairs will be shared according to the ratio of demand of each company for the prior calendar year. . Line losses will be computed monthly by OLIN (MKWH billed by TVA minus sum of all Charleston Site AC and DC power meter readings) and 10% of the overall Site power losses will be billed to ARCH at the weighted average noted above. . Olin will seek to obtain the most favorable electricity prices possible for Chlor-Alkali as an on-going activity. Both companies will work together to adjust their operations to utilize the most favorably priced power. . In the event that the price for ESP power becomes higher than the price for firm power, each Party has an option to either take an economic curtailment (i.e., a voluntary cutback in operations in view of the high cost of incremental ESP power) and reduce or eliminate its use of ESP power or continue to take its allotted share of ESP power in addition to its allotted portion of firm and LIPS power. The Party (or Parties) continuing to take ESP power under such circumstances will pay for the ESP power first, at the going ESP power rate, and the remainder of each Party's power consumption will be at the weighted average rate. For purposes of this section only, the quantity of power allotted to each Party in each power category (i.e., firm, LIPS and ESP) will be determined by multiplying the quantity in each category as billed by TVA in the preceding month multiplied by a fraction, the numerator being the Party's power demand for the preceding month and the denominator being the total power demand of the Charleston Site during the preceding month. . Both parties will establish their minimum firm power requirements as of the Distribution Date. As long as the total minimum firm power requirements for the Charleston Site are less than the firm power available under the existing power supply contract, the current methodology of using a weighted average rate will be used to determine Arch's electricity costs. If the firm power offered in a new power supply contract is less than the total minimum firm power requirements of both Parties, the two Parties will each restate their minimum firm power requirements. If the restated total minimum firm power requirements still exceed the amount of firm power offered, and the firm power requirements of the two Parties are not equal, the Party with the higher firm power requirement will pay a full firm power rate for the unequal firm power increment between the two Parties. The remaining power consumption of each Party will be billed at the weighted average rate (including the equal portions of firm power). 31 TERM: . OLIN will transmit AC electric power to ARCH for the duration of its present electric power supply contract with TVA. The incoming plant power line and Switchgear #1 and #19 will be made available to ARCH for the life of the facilities. 32 Exhibit A SERVICE: Steam PROVIDER: ARCH SERVICE DESCRIPTION . ARCH will provide 150 psig saturated steam to OLIN for use in the Chlor- Alkali Plant, the Charleston Administration Building, the Tech Center and for other miscellaneous users. . Steam will be provided at the downstream side of the 150 psig regulator located in the Boilerhouse. . ARCH will add a meter at a point beyond the first block valve on the 150 psig steam line in Piperack West of TRU area, to measure the steam flow to the HTH Plant. SERVICE CHARGE . Fixed Costs associated with the entire operation of the Boilerhouse (including those associated with the boiler feed water turbine and the deareator) will be allocated to OLIN monthly based upon OLIN's Budgeted Service Quantity Percentage for steam. . OLIN's Budgeted Service Quantity of steam will include steam requirements for the Chlor-Alkali Plant, Administration Building, Tech Center and other miscellaneous users. . Variable Cost of steam will be charged to OLIN based upon the quantity of steam used by OLIN in any month and the unit variable cost of producing and distributing steam during that month. . By-product 30 psig steam from the SO\\2\\ Plant will be supplied directly to HTH Decomposition Unit. The volume of steam provided to HTH Decomp will be added to the volume of steam produced at the Boilerhouse in calculating the Variable Unit Cost of steam production. TERM: . ARCH will provide steam to OLIN at Charleston as long as ARCH provides steam to its own Charleston operations. OLIN, as Service Receiver, will have the right to terminate this Service upon providing two years advance written notice. 33 Exhibit A SERVICE: Water Supply System Consisting of Treated Water, Cooling Water and Potable Water PROVIDER: OLIN SERVICE DESCRIPTION . OLIN will provide treated water, cooling water and potable water to ARCH. . The Charleston Site water system is not metered to the individual operating units; hence, the volume of treated water, cooling water and potable water used directly by ARCH's operating units will be estimated in a manner consistent with past practices at Charleston. For 1999 ARCH's Charleston operations are estimated to consume 20% of all the Sites' treated water, cooling water and potable water. . Either Party will notify the other if any modifications are required to be made to any of the water systems. Any major modifications require prior approval of both Parties before the modification is performed. . The following water specifications apply . Treated Water ambient temperature, less than .5ppm Cl\\2\\, 60 psig and pH of 8 to 8.5. . Cooling Water less than 90 degrees F, corrosion inhibited, minimum 50 psig. . Potable Water ambient temperature, higher than 60 psig, Cl\\2\\ content greater than 1.0ppm and turbidity less than 0.5. . The total Site treated water (which is used directly by the operating units and fed as a raw material to the potable water and cooling water systems) is calculated from the amount of AC electric power that is metered to the treating water system. Total Treated Water AC Usage (metered) = Estimated M Gals. Treated Water Used for the entire Charleston Site. -------------------------------------- 33 KWH/M Gals.
SERVICE CHARGE . For each month of 1999, ARCH will be allocated and billed for 20% (based upon past Charleston Plant practices) of the volume of treated water, cooling water and potable water produced and used at the Charleston Site multiplied by the variable unit cost. . During 1999, 20% of the Fixed Costs of the Charleston Site Water System will be allocated to ARCH. . There will be no additional charge to ARCH for the amount of treated water used as boiler feed water. 34 TERM: . OLIN will provide treated water, cooling water and potable water to ARCH for as long as such Service is provided to its own Charleston Site facilities. 35 Exhibit A SERVICE: Treatment of HAN Process Waste Water and HAN Area Storm Water PROVIDER: OLIN SERVICE DESCRIPTION . ARCH will continue to treat HAN process waste water and HAN area storm water for removal of mercury contaminants before discharge into the OLIN system. . OLIN will analyze the samples and give approval before HAN storm or process waters are discharged into the OLIN system consistent with the practices employed at the Charleston Plant prior to the Distribution Date. SERVICE CHARGE . There will be no charge to ARCH for treatment of the HAN area storm water if the HAN unit is not operating. . If the HAN unit is operating, OLIN will charge to ARCH its proportionate share of costs for analytical work based on the time that is required to perform these analyses. TERM: . OLIN will provide this Service for ARCH for an Initial Term of ten (10) years with ARCH reserving the right to terminate this Service upon 90 days advance written notice. 36 Exhibit A SERVICE: Automotive Maintenance Service PROVIDER: ARCH SERVICE DESCRIPTION . ARCH will provide maintenance service to all internal combustion powered equipment at the Charleston Site. This includes forklift trucks, pick-up trucks, mobile cranes, manlifts, vacuum truck, trackmobiles, automobiles, emergency generator, firewater pumps, etc. . All work will be performed upon receipt of a properly approved work order. . Work will be performed for OLIN on an as-requested basis. SERVICE CHARGE . Mechanics time and material used will be recorded on the work order covering each job performed by the Autoshop. . Mechanic's time will be billed to OLIN at a fully loaded rate which includes the use of equipment and tools. . Spare parts used from the Autoshop inventory or purchased from outside sources will be billed to OLIN at cost plus 10%. TERM: . Autoshop maintenance services will be provided to OLIN for as long as ARCH operates the Autoshop for its own equipment at the Charleston Site. 37 Exhibit A SERVICE: Emergency Response PROVIDER: OLIN SERVICE DESCRIPTION . OLIN shall provide emergency response equipment to ARCH's Charleston facilities consistent with emergency response service provided to OLIN's Charleston Plant prior to the Distribution Date. . However, OLIN and ARCH each shall be responsible for managing its own disaster responses, including implementation of their respective Emergency Plans which will be shared between the companies. . Emergency response will include, but not be limited to response to plant emergencies, chemical releases, chemical spills, fire, explosions, etc. . OLIN will provide and maintain appropriate emergency response equipment (including the fire truck, ambulance and the Emergency Equipment Building with the Crisis Management Center) in a ready state. . The Charleston Site Emergency Response Team will include ARCH and OLIN employees who will be the first level primary responders, the number to be agreed upon by the respective Plant Managers. Each company will assign an on-scene incident commander as well as a higher level crisis team, to respond to incidents of such company. Employees' wages associated with time spent in training will be absorbed by the employees' companies and not charged to OLIN's emergency response cost account. . ARCH will have access to the Charleston Site emergency communication system. ARCH shall maintain, and replace if necessary, the emergency radios and pagers used in connection with the system and ensure that they are in an operable condition at all times. . The command post for an incident shall be the Crisis Management Center. SERVICE CHARGE . All costs, Fixed and Variable, associated with the Charleston Site emergency response system (exclusive of employees' wages applicable to training time) will be accumulated and 38 billed monthly to ARCH on basis of ARCH's Charleston head count as a percentage of the total Charleston Site head count. TERM: . This Service will be provided by OLIN to ARCH for as long as OLIN provides this Service to its own Charleston operations. ARCH reserves the right to terminate this Service upon two (2) years advance written notice. 39 Exhibit A SERVICE: Environmental Services PROVIDER: OLIN SERVICE DESCRIPTION . OLIN shall provide to ARCH, on a routine basis, certain environmental services, performed for the ARCH operating facilities prior to the Distribution Date and which have not been assigned specifically to ARCH personnel. These Services include, but are not limited to, operation of the Site ponds and HTH landfill, monitoring outfalls, monitoring for NPDES compliance, obtaining samples and monitoring compliance with stormwater permits and preparing required reports to regulatory agencies and to ARCH Management (excluding those reports specifically assigned to each company including Title V permits and reports, HTH landfill permits and report, etc.). . OLIN shall communicate with and advise ARCH Charleston Plant Management of all environmental developments which may impact ARCH's Charleston operations. SERVICE CHARGE . Work performed exclusively for ARCH, such as placing material in the HTH landfill and the pond dredging of HTH sediment, will be performed under a work order recording time and material. Labor will be billed to ARCH at a fully-loaded rate (to cover cost of equipment and tools used) and material at cost. . Work performed on shared facilities, such as monitoring outfalls, for NPDES compliance (including analytical sampling and testing), testing Site drinking water and operating Site sanitary system will be recorded as to time and material. Labor will be billed to each Party at a fully-loaded rate (to cover cost of equipment and tools used) and material at cost at an agreed upon allocation percentage (agreed to each year at budget time) which for 1999 is budgeted to be 45% to ARCH and 55% to OLIN. TERM: . This Service will be provided by OLIN to ARCH for an Initial Term of ten (10) years with ARCH reserving the right to terminate any specific Service for 40 which ARCH has an independent permit which case the allocation of costs will be adjusted accordingly. 41 Exhibit A SERVICE: Fire Water PROVIDER: OLIN SERVICE DESCRIPTION . OLIN shall provide firewater to ARCH through the Charleston Site firewater system. The Charleston Site firewater system shall have the capability of delivering X gallons per minute at X psig. --- --- . ARCH, or its designated representative may conduct inspections of the elements of the Charleston Site firewater system serving ARCH, including, but not limited to, piping, deluge system, hose houses, fire monitors and fire pumps. Firewater pumps shall be flow tested annually or as required by regulation or by the insurance carriers. . Each Party shall notify the other promptly if any part of its respective portion of the firewater system is out of service for any reason. . Each Party will comply with reasonable recommendations by an independent inspection agency retained by the parties' respective insurance carriers concerning maintenance of the firewater system. . No modifications will be made to the firewater system as it relates to either company's operations at Charleston unless mutually agreed upon by both parties. . Use of the firewater system for tasks normally performed at the site (such as louvre dryer washes) will continue to follow the same permit and notification procedures consistent with the practices and procedures in place before the Distribution Date. SERVICE CHARGE . OLIN will bill ARCH monthly for its proportionate share of the Fixed Costs of operating and maintaining the Charleston Site firewater system. Such proportionate share be based upon ARCH's percentage of the total personnel located at the Charleston Site. TERM: . This Service will be provided to ARCH for the life of the Charleston Site facilities. 42 Exhibit A SERVICE: Gasoline and Diesel Fuel PROVIDER: OLIN SERVICE DESCRIPTION . OLIN will order, receive and store gasoline and diesel fuel for all automotive equipment and other internal combustion powered equipment at the Charleston Site. The gasoline and diesel oil pumps are located at the west side of the HTH Mechanical Shop. . Gasoline and diesel fuel will be dispensed to ARCH's authorized personnel. Records will be maintained and costs allocated per the current method of allocation until such time that a credit card or other suitable system is in place. SERVICE CHARGE . Until a credit card system is implemented, OLIN will bill ARCH monthly for the quantity of gasoline and diesel oil withdrawn multiplied by the average cost of gasoline and diesel oil for that particular month. . There will be no Fixed Cost charges to ARCH for this service. . Any discrepancies at month end between the sums on the withdrawal tickets and the pump readings will be allocated to each Party on the basis of percentage of use. TERM: . This Service will be provided by OLIN to ARCH for as long as OLIN provides this service to its own automotive equipment and other internal combustion powered equipment at Charleston. 43 Exhibit A SERVICE: Hydrogen PROVIDER: OLIN SERVICE DESCRIPTION . Hydrogen from OLIN's Chlorine cells will be cooled and blown to ARCH's J-3 Plant and to ARCH's Boilerhouse. At the Boilerhouse ARCH will accept the hydrogen at the outlet side of the main block valve. . Hydrogen will first be provided to OLIN's HCL operation and to ARCH's J-3 Plant before being available for burning in the boilers. . Hydrogen in ARCH's J-3 Plant and Boilerhouse will displace or reduce the use of natural gas. . The hydrogen provided by OLIN will be measured in MCF, will have a pressure of 5-6 psig at the cells and will be greater than 99.5% H\\2\\. . Hydrogen provided to J-3 will be metered through an existing meter in the H\\2\\ line to J-3. Approximately 163,000MCF H\\2\\ are budgeted to be used by J-3 in 1999. SERVICE CHARGE ARCH will be billed for the quantity of hydrogen received by ARCH at the boilerhouse and at the J-3 Plant as follows: . For calendar year 1999, hydrogen will be supplied to ARCH at no charge. . For calendar year 2000, hydrogen will be billed to ARCH at 25% of the equivalent BTU value of natural gas received at the Charleston Site. . For calendar year 2001, hydrogen will be billed to ARCH at 50% of the equivalent BTU value of natural gas received at the Charleston Site. . For calendar year 2002 and beyond, hydrogen will be billed to ARCH at 67.5% of the equivalent BTU value of natural gas received at the Charleston Site. TERM: . Hydrogen will continue to be provided to ARCH' J-3 Plant and to the Boilerhouse as long as it is available from OLIN's Chlorine cells. OLIN does have the right to pursue alternate economical uses for the hydrogen and if successful may terminate this Service upon giving ARCH one (1) year advance written notice. 44 Exhibit A SERVICE: Hydrochloric Acid PROVIDER: OLIN SERVICE DESCRIPTION . OLIN will supply 30 36% Hydrochloric Acid (HCL) to ARCH from the Brine Area HCL Tank. . HCL is provided to ARCH from either of two sources internal production by OLIN's Chlor-Alkali Plant or outside purchases. . HCL delivered to ARCH will be measured at the HTH Acid Meter. From the total reading of the HTH Acid Meter will be deducted the HCL meter reading at Secondary Treatment of the Chlor-Alkali Plant to obtain actual usage by ARCH. SERVICE CHARGE . OLIN will bill ARCH at the market price as reported in the Chemical Marketing Reporter in effect on September 1 of each year and as budgeted by the Parties for the next year for regular grade 30-36% Hydrochloric Acid. If at the end of the year, the year's average market price varies by more than 20% from the budgeted price (i.e. the September 1 reported price from the prior year), the actual price of HCL received under this Agreement will be adjusted accordingly. TERM: . OLIN will provide ARCH with HCL for an Initial Term of ten (10) years with ARCH reserving the right to terminate this Service upon 90 days advance written notice. 45 Exhibit A SERVICE: Laboratory Space and Facilities in Technology Center PROVIDER: OLIN SERVICE DESCRIPTION . OLIN will provide laboratory space and facilities in the Technology Center for ARCH employees to conduct quality assurance work . Such laboratory space and facilities will be dedicated by OLIN for ARCH's exclusive use. SERVICE CHARGE . OLIN will bill ARCH monthly for use of laboratory space and facilities at an annual cost agreed to between OLIN and ARCH at budget time each year for the next succeeding Calendar Year. TERM: . OLIN will provide this service for ARCH for an Initial Term of ten (10) years subject to termination of this Service by either Party upon one (1) year advance written notice. 46 Exhibit A SERVICE: Laboratory Services PROVIDER: OLIN SERVICE DESCRIPTION . OLIN shall provide to ARCH laboratory services to conduct trace metal analyses of incoming raw materials, processes and finished products. . At budget time each year, ARCH will advise OLIN of the estimated number of analyses that may be performed and OLIN and ARCH will determine and agree upon the estimated number of man hours that may be required to perform the analyses during the next Contract Year. . OLIN shall provide this Service to ARCH as requested and as available. SERVICE CHARGE . OLIN shall bill ARCH each month at a cost for the analyses performed during the previous month based on a rate for OLIN analytical services established and agreed to annually at budget time. TERM: . OLIN shall provide this Service for an Initial Term of ten (10) years with ARCH having the right to terminate this Service upon ninety (90) days written notice. 47 Exhibit A SERVICE: Medical PROVIDER: OLIN SERVICE DESCRIPTION . OLIN will provide to ARCH's Charleston Site employees the following but not all inclusive, medical services . Employment and exit physical examinations . Regular periodic health physicals . Treatment of occupational injuries and illnesses . Non-occupational injuries and illness will be attended to as staff time is available . Surveillance examinations for all employees for audiometric and pulmonary functions . Return to work authorization . Substance abuse screening . Wellness and blood borne pathogens programs . In performing medical services to ARCH, OLIN's medical staff will maintain logs of medical visits by ARCH personnel and will retain medical records to comply with OSHA requirements. Medical records of ARCH's personnel will receive the same confidentiality as accorded to OLIN's Charleston employees. SERVICE CHARGE OLIN will bill ARCH for its proportionate share of the Charleston Medical Department expenses based on head count and as per the below formula. ARCH Monthly Charge = Total Monthly Charleston Site Medical Dept. Expenses X ARCH's Charleston Site Head Count for the month ----------------------------------------------------- ----------------------------------------------- Total Charleston Site Head Count for the month
TERM: . OLIN will provide medical services to ARCH's Charleston personnel for as long as such Service is provided to OLIN's Charleston employees. 48 Exhibit A SERVICE: Natural Gas and Natural Gas Distribution PROVIDER: OLIN SERVICE DESCRIPTION . OLIN will provide natural gas to ARCH's Boilerhouse and J-3 Plant. . Natural gas to J-3 will be provided on an as-required basis as a replacement for the unavailability of sufficient hydrogen for the J-3 operation. The maximum amount of natural gas that can be consumed at J-3, in lieu of all the hydrogen, is approximately 55,000 MCF per year. . Natural gas will be provided to ARCH's Boilerhouse as a fuel supplement to hydrogen. Natural gas will be used in the Boilerhouse to full extent of its availability before resorting to the use of fuel oil. . Natural gas consumed by J-3 will be based upon meter readings of the combined J-3/TRU gas stream at the Boilerhouse and the gas meter reading in the TRU building. . J-3 Natural Gas Consumption = Meter reading of combined J-3/TRU gas stream minus gas meter reading in TRU building. . Natural gas consumed in the Boilerhouse will be the sum of the gas meter readings on Boilers Nos. 1, 2 and 3. SERVICE CHARGE . OLIN will bill ARCH for natural gas volumes actually used in any month multiplied by the same rate per MCF (or per MMBTU) as OLIN pays to the Charleston Site natural gas supplier. . No natural gas distribution system Fixed Costs will be billed to ARCH. TERM: . OLIN will provide natural gas to ARCH as long as natural gas is provided by OLIN to its operations at the Charleston Site. 49 Exhibit A SERVICE: Pipe Racks PROVIDER: OLIN and ARCH SERVICE DESCRIPTION . Each Party will own and maintain the pipe racks located within the battery limits of its Charleston Site operations. . The maintenance of the pipe lines on or within the pipe racks will be the responsibility of the Party owning the pipe lines. . Each Party will negotiate in good faith to make unused pipe rack capacity available for use by the other Party for expansions or improvements to operations. SERVICE CHARGE . Since each Party will maintain its own pipe racks there will be no charges from one Party to the other. TERM: Life of the facilities. 50 Exhibit A SERVICE: Propane PROVIDER: ARCH SERVICE DESCRIPTION . ARCH will order, receive, and store propane gas for mobile equipment and other gas burning equipment at the Charleston Site. . Propane gas will be dispensed by qualified personnel. . Records and billing will occur consistent with past practice until such time as a revised system is instituted such as credit card purchasing. SERVICE CHARGE . ARCH will bill OLIN monthly for the quantity of propane gas withdrawn during the month multiplied by the then average unit cost of the propane inventory. . There will be no Fixed Cost charges for this service. TERM: . This Service will be available to OLIN for as long as ARCH provides this Service to its own Charleston facilities. 51 Exhibit A SERVICE: Rail Car Switching and Storage and Track Maintenance PROVIDER: OLIN SERVICE DESCRIPTION . OLIN will provide rail car switching service for lime cars for ARCH's Charleston Site. . ARCH will have the responsibility of notifying and coordinating with OLIN's Customer Satisfaction Team Leader the schedule for movement of loaded and unloaded lime cars. . The HTH track spur can accommodate a total of 13 rail cars one spotted for unloading and twelve available for unloading. Under normal circumstances this spur should provide sufficient rail car storage capacity for the HTH operation. If the need arises to store more than 13 ARCH railcars at the Charleston Site, upon ARCH's request, OLIN will make additional track available on a temporary basis if OLIN has such track to make available. If OLIN cannot make additional track space available, OLIN will assist ARCH in arranging for outside storage of excess cars. . ARCH will be responsible for maintaining the lime railroad tracks up to and including the switch on those tracks. OLIN will be responsible for maintaining all other tracks in the Charleston Site. SERVICE CHARGE . OLIN will bill ARCH for rail cars switched in and out of the Charleston Site for ARCH at an annualized rate of $65,000 for 1999, and for future years in an amount to be agreed as part of the budgeting process for such year. . Fixed costs of repairing the track mobile and maintaining the main line track in the Charleston Site will be allocated and billed to ARCH on the basis of the percentage of the total number of rail cars delivered to or shipped from the Charleston Site that are for ARCH's account. . Costs of repairing any railcar damage, which occurs while the car is in the Charleston Site, will be the responsibility of the Party causing the damage. 52 Derailing costs will be the responsibility of the Party causing the derail of cars. TERM: . This Service shall be provided by OLIN to ARCH for an Initial Term of 10 years; however, ARCH has the right to terminate this Service upon giving one (1) year advance written notice. 53 Exhibit A SERVICE: Recovered Salt PROVIDER: ARCH SERVICE DESCRIPTION . Salt is recovered by OLIN at the Chlor Alkali Salt Centrifuge from the saturated brine slurry pumped to Chlor Alkali 510 brine system from ARCH's HTH Unit. Weak brine streams are pumped by OLIN to the J-3 Salt Dissolver and a saturated brine solution is returned to the Chlor Alkali 812 brine system. . The slurry from the HTH Unit will contain less than 15% Hypochlorite and the saturated brine from J-3 will have less than 1.0 ppm Nickel. . Approximately 27,000 dry tons of salt is budgeted to be recovered by OLIN in 1999. SERVICE CHARGE The quantity of salt recovered by OLIN in the salt centrifuge is estimated based upon the total caustic soda used in the J-3 and HTH Units, multiplied by a factor based on salt in the recovery stream adjusted for any known losses and for salt carried into the HTH products. Salt recovered by OLIN at the salt centrifuge will be billed to OLIN as follows: . For calendar year 1999, recovered salt will be supplied at no charge. . For calendar year 2000, recovered salt will be billed at 25% of the budgeted outside-purchase delivered salt price, less freight. . For calendar year 2001, recovered salt will be billed at 50% of the budgeted outside-purchase delivered salt price, less freight. . For calendar year 2002 and beyond, recovered salt will be billed at 67.5% of the budgeted outside-purchase delivered salt price, less freight. TERM: . OLIN will accept the saturated brine from the HTH and J-3 Units for the life of the Service Facilities. 54 Exhibit A SERVICE: Site Security and Gate Access PROVIDER: OLIN SERVICE DESCRIPTION . OLIN will provide directly or through an outside contractor the security services for the Charleston Site. . ARCH will prepare and update in a timely manner a Policy and Procedures Manual which will apply to ARCH employees and ARCH visitors entering the Charleston Site and which will be administered by the security personnel at the Main Gate and Contractors' Gate. This Manual will continuously be consistent with OLIN Policies and Procedures in effect at the time. . The Main Gate will be used by ARCH employees for ingress and egress to ARCH facilities on a 24 hour basis. . Security personnel to the Main Gate will log all visitors to the Site, handle documents for outbound shipments (as required), conduct safety orientations, monitor the Weather Alert System and monitor the Mutual Aid Radio. . OLIN security personnel will monitor and OLIN will maintain the chlorine sensors located at the Site's perimeter. . OLIN shall make available to ARCH the truck scales located at the main gate. Weigh tickets will be supplied to the truck driver at the time of weighing, if requested. There will be no charge to ARCH for use of the truck scales. SERVICE CHARGE . All costs, both Fixed and Variable, will be accumulated and billed monthly to ARCH on the basis of ARCH's Charleston head count as a percentage of the total Charleston Site head count. TERM: . This Service will be provided by OLIN to ARCH for the life of the Charleston Site; however, ARCH reserves the right to terminate this Service upon one (1) year advance written notice. 55 Exhibit A SERVICE: Specialized Skills Support PROVIDER: Either Party SERVICE DESCRIPTION . Either Party will provide to the other company, on an as- requested, as-available basis, specialized skills support (including the necessary equipment to perform the specialized skills) such as, but not limited to: specialty welding, refrigeration mechanics and freon recovery, vibration analysis, infrared testing, fan balancing and machinists and crane operations. SERVICE CHARGE . Personnel providing specialized skills support to the Service Receiver will be billed at a fully-loaded hourly rate to include the cost of equipment and tools. TERM: . Either Party will provide specialized skills support to the other Party for an Initial Term of ten (10) years. 56 EX-10.3 8 CHLOR-ALKALI SUPPLY AGREMENT EXHIBIT 10.3 CHLOR-ALKALI SUPPLY AGREEMENT ----------------------------- THIS CHLOR-ALKALI SUPPLY AGREEMENT ("AGREEMENT") BETWEEN OLIN CORPORATION ("OLIN"), A VIRGINIA CORPORATION, AND ARCH CHEMICALS, INC. ("ARCH"), A VIRGINIA CORPORATION, IS EXECUTED AS OF THIS ______ DAY OF ______________, 1999. 1. RECITALS 1.1 Olin ("Seller") is a manufacturing corporation operating primarily in the chemicals industry. Olin operates liquid chlorine and caustic production facilities at its Chlor Alkali plants at Charleston, Tennessee, McIntosh, Alabama, and Niagara Falls, New York, and from time to time engages in caustic and liquid chlorine commodity exchanges with other producers. 1.2 Arch ("Buyer") is a specialty chemicals manufacturer which has a need for a reliable supply of liquid chlorine and caustic (Products). 1.3 To insure a reliable source of supply of the Products for internal use by Buyer, and to enable Seller to sell to Buyer such Products under the terms and conditions set forth below, and for other good and valuable consideration, Seller agrees to sell, and Buyer agrees to purchase from Seller, the Products described herein. 2. PRODUCT. Membrane Grade or Rayon Grade Caustic (Exhibit 1), Liquid --------- Chlorine (Exhibit 2). --------- 3. QUANTITY. Buyer agrees to purchase 100% of its requirements of the Products during the term of the Agreement, but this "requirements" obligation shall not apply to Products used in any business acquired by Buyer after the effective date of this Agreement. Buyer initially estimates its requirements for liquid chlorine at 100,000 tons annually. Buyer initially estimates its requirements for caustic at 80,000 tons annually. During the Agreement, Buyer shall continually provide to Seller, in writing, an estimate of its prospective monthly and quarterly requirements for the respective Products. 4. TERM. The Initial Term shall be five (5) years, from [ ], through 12/31/2003; and said Initial Term shall extend thereafter automatically for two (2) year periods (Extended Term). Either party may terminate the Agreement upon two (2) years written notice; however, written notice of termination may not be given before December 31, 2001, and any notice of termination of this Agreement shall be given so that the effective termination date will be the last day of a calendar year. If such written notice of termination is given by December 31, 2001, then said Agreement shall terminate on December 31, 2003. If such written notice of termination is not given by December 31, 2001, then said Agreement shall renew automatically at the end of the Initial Term for a period of one (1) year (Extended Term), commencing January 1, 2004. 5. SHIPPING CONTAINERS. Bulk. 6. METHOD OF SHIPMENT. Seller's Railcars or Seller's Bulk Truck Carriers, Seller's pipeline, or barge. 7. PRICES. The prices for Products purchased by Buyer from Seller during the Term of this Agreement shall be established at competitive levels by mutual, written agreement between Buyer and Seller from time to time. 8. TERMS OF PAYMENT: Net 30 days on cycle billing. 9. ORIGIN. (a) Seller will supply Products under this Agreement from its own manufacturing facilities or from manufacturing facilities owned by third- parties with whom Seller has commodity-exchange agreements (Exchange) in place. Seller will use its best reasonable efforts to tender delivery of Products F.O.B. at points which would represent the most economical transportation cost to Buyer. Except as provided in subparagraph (b), Seller retains the sole, subjective right to manage the Exchange of Products and shall have no liability to Buyer for such decisions, nor shall such Exchange decision be a breach of this Agreement. (b) Regardless of any Exchange conducted by Seller for the Products subject to this Agreement, in no event shall Buyer be responsible for freight charges to its Charleston facility. The parties agree to use their best efforts to enter into Exchanges that will result in freight savings. Any net freight savings resulting from an Exchange shall be shared equally by the parties. All Product supplied under an Exchange shall be subject to the same terms and conditions as set forth in this Agreement. 10. DESTINATION. Buyer's facilities at Lake Charles, Louisiana, Beaumont, Texas, Shreveport, Louisiana, Doe Run, Kentucky, Charleston, Tennessee, and Rochester, New York, or any other reasonable USA locations designated by Buyer. 11. COMPARATIVE FAULT, PERSONAL INJURY, PROPERTY DAMAGE, AND ENVIRONMENTAL INDEMNITY. Seller and Buyer will each defend, indemnify, and hold the other harmless from any loss, liability, damage, or expense due to any property damage, bodily injury, death, or any liability for damages, including any governmental fines, penalties, or assessments arising from the violation of any local, state, or federal environmental laws whatsoever, -2- arising out of, or in connection with, or resulting from, this Agreement, or any matters related thereto, but only for the amount proximately caused by, or legally resulting from the respective percentage, if any, of each party's comparative negligence. 12. FORCE MAJEURE. Failure (in whole or in part) or delay on the part of either party, or any carrier in the performance of any of the obligations imposed upon the other hereunder shall be excused and such party shall not be liable for damages or otherwise on account thereof, when such failure or delay is the direct or indirect result of any of the following causes whether or not existing at the date hereof, and whether or not reasonably within the contemplation of the parties at the date hereof, namely: acts of God, earthquakes, fire, flood or the elements; malicious mischief, insurrection, riot, strikes, lockouts, boycotts, picketing or labor disturbances; public enemy; war (declared or undeclared); compliance with any federal, state or municipal law, or with any regulation, order or rule (including, but not limited to, priority, rationing or allocation orders or regulation) of governmental agencies, or authorities or representatives of any government (foreign or domestic) acting under claim or color of authority; total or partial failure or loss or shortage of all or part of transportation facilities ordinarily available to and used by a party hereto in the performance of the obligations imposed by this Contract, whether such facilities are such party's own or those of others; or total or partial loss or shortage of raw or component materials or products ordinarily required by a party to produce the Product; the commandeering or requisitioning by civil or military authorities of any raw or component materials, products, or facilities, including, but not limited to, producing manufacturing, transportation and delivery facilities, perils of navigation, even when occasioned by negligence, malfeasance, default or errors in judgment of the pilot, master, mariners or other servants of the ship's owner; or any cause whatsoever beyond the control of either party hereto, whether similar to or dissimilar from the causes herein enumerated; provided, however, that the settlement of strikes or lockouts shall be entirely within the discretion of the party having such difficulty and that any requirement that a force majeure shall be remedied with the exercise of due diligence shall not require the settlement of strikes or lockouts by acceding to the demands of the opposing party when such course is inadvisable in the discretion of the party having such difficulty. If by reason of any such circumstances, Seller's supply of Product shall be insufficient to meet all of its Product requirements, Seller shall have the right at its option and without liability to apportion among any and all of its customers, including its affiliated division and companies, in such manner as Seller believes equitable. In the event a force majeure is declared under this Agreement, Buyer shall be excused from purchasing that portion of its requirements for Products which are purchased from an alternate supplier during the period of force majeure. If, during a force majeure, Seller is unable to supply Products via pipeline at Buyer's Charleston facility, Seller agrees to provide any reasonable, existing unloading and delivery services at Charleston to facilitate the supply of Product from an alternate means of supply, but Seller shall not be required to spend or invest any capital or money to comply with this requirement. Notwithstanding the above, Seller expressly acknowledges and agrees that it shall not be excused from performing its obligation to supply Product under this Agreement as a result of its decision to impose order control on its customers. 13. TERMINATION. If either party shall fail to comply with any material provisions, requirements, or conditions of this Agreement, or should file a voluntary petition under any -3- bankruptcy law, or be adjudicated a bankrupt, become insolvent, or commit an act of bankruptcy (Material Breach), and such Material Breach shall go unabated for a period of at least sixty (60) days, then the aggrieved party, upon three (3) days written notice to the party in violation of such conditions, may terminate this contract in whole without prejudice to any other remedy. The aggrieved party shall give written notice of such Material Breach as soon as possible following discovery of such Material Breach. 14. CONFIDENTIALITY. Buyer acknowledges that prior to and during year one (1) of this Agreement, Seller shall be disclosing to Buyer certain pricing and manufacturing information which it considers confidential and proprietary to Seller (hereinafter called "Confidential Information"). Buyer agrees during any term of this Agreement to refrain from disclosing such Confidential Information to any third person, except to Buyer's outside auditors who are under a written duty of confidentiality to Buyer. Buyer and such auditors may only disclose such Confidential Information to employees of Buyer who have a reasonable need to know such Confidential Information. 15. NOTICES. Any notice or written communication provided for in this Agreement by either party, shall be in English by facsimile, telegram, and/or electronic mail, and shall be confirmed immediately by registered air mail letter, promptly transmitted and addressed to the appropriate party. All notices and communications shall be sent to the appropriate address set forth below, until the same is changed by notice in writing to the other party as the case may be. If to Seller: Olin Corporation 490 Stuart Road NE Cleveland, TN 37312 Attention: President, Chlor Alkali Products If to Buyer: Arch Chemicals, Inc. 501 Merritt 7 Norwalk, CT 06856 Attention: General Counsel 16. DELIVERY. Unless specified otherwise deliveries of Product shall be made at such times, within the usual business hours of Seller, as Buyer shall specify by reasonable advance notice to Seller, which shall include any necessary shipping instructions, and Seller shall prepare and deliver to Buyer such shipping papers as may be agreed. 17. PRODUCT STEWARDSHIP. The parties agree to adhere to and use their best efforts to comply with an implement the RESPONSIBLE CARE initiative developed by the -4- Chemical Manufacturers Association (CMA), whether or not both parties are members of CMA. This duty includes, but is not limited to, adherence to the GUIDING PRINCIPLES for RESPONSIBLE CARE and implementation of the six CODES OF MANAGEMENT PRACTICES. In the event either party fails to comply with the RESPONSIBLE CARE provisions set out above, the non-complying party shall have thirty (30) days to cure such non-compliance, otherwise the complying party shall have the right to immediately terminate this Agreement, without liability, except for any liability for already-incurred imbalances. 18. TITLE. Title to and risk of loss for Product transferred hereunder shall pass from Seller to Buyer upon delivery to Buyer's location . With respect to Product delivered by pipeline, title and risk of loss shall pass from Seller to Buyer at the point where the Seller pipeline enters onto the leased or owned premises of Buyer. Buyer is free to contract with any designated party for the passage of title and risk of loss for Product upon Seller's delivery to such designated party at any shipping location. 19. WARRANTIES. Seller warrants that (a) the Products are of the quality set forth in Exhibits 1 and 2 hereto, and (b) the title conveyed is good and the product is free from any lawful security interest, lien or encumbrance. SELLER MAKES NO FURTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR OTHERWISE. Buyer assumes all risk of patient infringement by reason of any use Buyer makes of the product in combination with other material or in the operation of any process. 20. CREDIT. Seller may recover for each shipment hereunder as a separate transaction, without reference to any other shipment. If Buyer fails to pay any invoice in accordance with the terms of this contract, Seller may, at its option, defer further shipments until payment has been made (in which event Seller may elect to extend the contract period for a time equal to that for which shipments were so deferred), or, in addition to any other legal remedy, Seller may decline further performance of this contract. If at any time, in the judgment of Seller, the financial responsibility of Buyer is impaired, Seller may change the terms of payment and/or require payment as a condition of shipment. 21. TAXES. Upon invoice, Buyer shall reimburse Seller for any federal, state or local excise or other tax, assessment, license fee or other charge, or increases thereof, which Seller may be required to pay upon the sale, production, transportation, delivery or use of the Products. 22. GOVERNMENTAL REGULATION. Should Seller elect to discontinue, curtail or limit the production or sale of the Products in consequence of the application of any governmental regulation or order (including but not limited to those relating to environment, Seller shall not be obligated to deliver the Products from other than the production or shipping points designated herein and there shall be no obligation to rebuild or repair any damage or destruction to such production or shipping points in order to fulfill this contract. -5- 23. CLAIMS. The weights, tares and tests fixed by Seller's invoice shall govern unless proven to be incorrect. Claims relating to quantity, quality, weight, condition and loss of or damage to any of the product sold hereunder shall be waived by Buyer unless made within thirty (30) days after receipt of Products by Buyer. 24. LIMITATION OF LIABILITY. (a) Buyer's exclusive remedy and Seller's exclusive liability under this contract or otherwise (including contractual and tort liability) shall be for damages which shall in no event exceed so much of the purchase price as is applicable to that portion of the particular shipment with respect to which damages are claimed. In no event shall Seller be liable to Buyer for any incidental or consequential damages arising in connection with this contract or the product sold hereunder. (b) Except to the extent provided by Seller, Buyer assumes all risks and liability, and Seller assumes no liability, with respect to transporting or unloading of the Products (including failure of discharge or unloading implements or materials used by Buyer), storage, handling, sale and use of the Products (including its use alone or in combination with other substances or in the operation of any process), and the compliance or non-compliance with all federal, state and local laws and regulations applicable to the Product; Seller assumes the same risks and liability stated in this subparagraph with respect to Products transported or unloaded by Seller. The limitations stated in Paragraph 24 shall not apply to Paragraph 11 of this Agreement. 25. NON-WAIVER. Seller's or Buyer's waiver of any breach or failure to enforce any of the terms and conditions of this contract at any time shall not in any way affect, limit or waive such party's right thereafter to enforce strict compliance with every term and condition hereof. 26. ASSIGNMENT. Neither Buyer nor Seller shall assign this contract (nor any right or obligation hereunder), in whole or in part without the prior written consent of the other, which consent shall not be unreasonably withheld. It shall be reasonable to withhold consent if the requested assignment is to a competitor of either party or their related entities, divisions, and subsidiaries. Any such purported assignment without such consent shall be void. Either party shall have the right to assign this contract and its rights and obligations hereunder, without obtaining the prior written consent of the other, to any entity with which either party (a) merges, (b) sells a substantial part of its assets or business, or (c) sells a substantial part of its assets or business relating to the manufacture and/or sale of the Product. 27. APPLICABLE LAW. Tennessee law shall apply to the interpretation of this Agreement for any matter arising from the sale of Product produced from Seller's Charleston, Tennessee Facility, without giving effect to its conflict of law provisions. Otherwise, this contract shall be governed by and construed in accordance with the laws of the State of New York without giving effect to its conflict of law provisions. -6- 28. CAPTIONS. The titles contained in this contract are for reference purposes only and shall not affect in any way the meaning or interpretation of this contract. 29. SEVERABILITY. If any provision of this contract shall be prohibited or invalid, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision and the remaining provisions of this contract. 30. AMENDMENT. This contract is intended as the final expression of the parties' agreement and is the complete and exclusive statement of the terms hereof. No statements or agreements, oral or written, made prior to or at the signing hereof, shall vary or modify the written terms hereof; and neither party shall claim any amendment, modification or release from any provisions hereof by reason of (a) a course of action or mutual agreement unless such agreement is in writing signed by the other party and specifically stating it as an amendment to this contract, (b) course of performance, or (c) usage of trade. No modification or addition to this contract shall be affected by the acknowledgment or acceptance by Seller of any purchase order, acknowledgment, release or other forms submitted by Buyer containing other or different terms or conditions. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. OLIN CORPORATION ARCH CHEMICALS, INC. CHLOR ALKALI PRODUCTS DIVISION By: ___________________________ By: ____________________________ Name:__________________________ Name:___________________________ Title:_________________________ Title:__________________________ -7- 0 CHLOR ALKALI PRODUCTS 650 25TH STREET N. W., SUITE 300, CLEVELAND, TN 37311 423/336-4850 - FAX: 423/336-4830 CAUSTIC SODA SPECIFICATIONS
GRADE ----- COMPONENT BASIS RAYON MEMBRANE COMMERCIAL --------- ----- ----- -------- ---------- NaOH weight% 50.0 - 51.5 49.5 - 51.5 49.0 - 52.0 Na\2\O weight% 38.7 - 39.9 38.3 - 39.9 38.0 - 40.3 Na\2\CO\3\ weight% 0.06 0.05 0.2 NaCl ppm 30 75 11,000 Na\2\SO\4\ ppm 20 100 200 NaClO\3\ ppm 1 5 3,000 Iron (Fe) ppm 2.0 2.0 7 Si (Silicon) ppm 10 2.4 195 Al (Aluminum) ppm 3 0.25 20 Ca (Calcium) ppm 20 0.5 45 Mg (Magnesium) ppm 1.2 0.1 12 Mn ppm 0.4 0.2 1 Ni ppm 0.3 0.5 2 Cu ppm 0.5 0.2 2 Hg ppm 0.5 0.01 N.D.*
* Note: N.D. is below Minimum Detection Limit (MDL) of 0.01 ppm . Certified by the NSF for the ANSI/NSF 60 Standard . Satisfies the Food Chemical Codex IV(FCC IV) requirements . Satisfies the AWWA Standard B-501-93 EXHIBIT 1 CHLOR ALKALI PRODUCTS 650 25TH STREET N. W., SUITE 300, CLEVELAND, TN 37311 423/336-4850 - FAX: 423/336-4830 - -------------------------------------------------------------------------------- CHLORINE SPECIFICATIONS
CHEMICAL PROPERTIES AUGUSTA CHARLESTON MCINTOSH NIACHLOR -------------------- ------- ---------- -------- -------- Purity, weight % 99.5 min. 99.5 min. 99.5 min. 99.5 min. Moisture, ppm 75 max. 75 max. 30 max 50 max. Non-volatile Residue, ppm 30 max. 30 max. 30 max. 50 max. Arsenic, as As, ppm 3 max. 3 max. 3 max. 3 max. Lead, as Pb, ppm 5 max. 5 max. 5 max. 5 max. Mercury, as Hg, ppm 1 max. 1 max. 1 max. 1 max. Heavy Metals, as Pb, ppm 10 max. 10 max. 10 max. 10 max. Carbon Tetrachloride, ppm 100 max. 100 max. 100 max. 100 max. Trihalomethanes, ppm 300 max. 300 max. 300 max. 300 max.
. Certified by the NSF for the ANSI/NSF 60 Standard . Satisfies the Food Chemical Codex IV(FCC IV) requirements . Satisfies the AWWA Standard B-301-92 - -------------------------------------------------------------------------------- EXHIBIT 2 EX-10.4 9 COVENANT NOT TO COMPETE AGREEMENT EXHIBIT 10.4 COVENANT NOT TO COMPETE AGREEMENT dated as of [ ], 1999 (this "Agreement"), between ARCH CHEMICALS, INC., a Virginia corporation ("Arch"), and OLIN CORPORATION, a Virginia corporation ("Olin"). Each of Arch and Olin are sometimes hereinafter referred to as a "Party" and collectively referred to as the "Parties". WITNESSETH: ----------- WHEREAS, Olin and Arch have entered into that certain Distribution Agreement dated as of the date hereof, between Olin and Arch (the "Distribution Agreement"), providing for the distribution of all of the outstanding shares of common stock of Arch to the shareholders of Olin; WHEREAS, prior to entering into the Distribution Agreement, the Parties and their predecessor businesses freely shared information concerning their respective businesses, including the research and development of specialty chemical products and other chemical products and product-related services, as these businesses were part of a single corporate entity and parent-subsidiary corporate structure; WHEREAS, Olin and Arch each have a substantial amount of know-how and other knowledge concerning the operations of the business of the other entity; and WHEREAS, to allow each of Olin and Arch (and their respective shareholders) to obtain the full value of its respective rights under the Distribution Agreement, Olin and Arch desire to enter into and execute this Agreement concerning the Arch Business and the Olin Business (as such terms are defined in the Distribution Agreement). NOW, THEREFORE, in consideration of the premises and of the mutual covenants set forth below, the Parties hereby agree as follows: 1. DEFINITIONS. ------------ Capitalized terms used herein without definitions shall have the respective meanings assigned to them in the Distribution Agreement. As used in this Agreement, the following terms shall have the following respective meanings: "ENGAGE IN" and derivations thereof shall mean directly or indirectly to engage in, own, manage, participate in, or otherwise obtain an interest in (as owner, stockholder, agent, partner, representative, director, consultant, or otherwise). 2 "NON-COMPETE TERM" shall mean a five (5) year period commencing on the Distribution Date. "NON-SOLICIT TERM" shall mean a two (2) year period commencing on the Distribution Date. "PENSION PLAN" shall mean, with respect to a Party and its Affiliates, any "employee pension benefit plan" or "pension plan", in each case as defined in Title 1, Subtitle A, Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended, of such Party and its Affiliates. "TERRITORY" shall mean the entire world. "WATER TREATMENT" shall mean the manufacture, sale, marketing or distribution of water purification products and product-related services for the purpose of water purification or sanitization. 2. COVENANT NOT TO COMPETE. ------------------------ During the Non-Compete Term: (a) Olin agrees that it shall not, and shall not permit any of its Subsidiaries, to Engage In, anywhere in the Territory, the manufacture, sale, marketing or distribution of products or product-related services that are the same as or substantially similar to those which the Arch Business is manufacturing, selling, marketing or distributing as of the Distribution Date ("Arch Business Activities"); provided, -------- however, that nothing herein shall prevent Olin and its ------- Subsidiaries from (i) Engaging In Water Treatment, except that Olin and its Subsidiaries may not Engage In Water Treatment with respect to those products (including products substantially similar in chemical composition to any such product or derivative of such product; it being understood and agreed by the Parties that sodium hydrosulfite is not substantially similar in chemical composition to calcium hypochlorite) that are manufactured, sold, marketed or distributed by the Arch Business as of the Distribution Date; and/or (ii) making any investment through a Pension Plan of Olin or any of its Subsidiaries. (b) Arch agrees that it shall not, and shall not permit any of its Subsidiaries, to Engage In, anywhere in the Territory, the manufacture, sale, marketing or distribution of products or product-related services that are the same as or substantially similar to those which the Olin Business is manufacturing, selling, marketing or distributing as of the Distribution Date ("Olin Business Activities"); provided, -------- however, that nothing ------- 3 herein shall prevent Arch and its Subsidiaries from making any investment through a Pension Plan of Arch or any of its Subsidiaries. (c) Nothing herein shall prevent Olin and Arch from mutually agreeing to develop or manufacture chemical products or product-related services cooperatively, whether through subcontracting, work share arrangements or joint development projects. (d) Neither Party shall be deemed to violate this Section 2 in the event that such Party directly or indirectly acquires in whole or in part (an "Acquisition") any person or business (an "Acquired Enterprise"), that Engages In (x) in the case of Olin, Arch Business Activities and (y) in the case of Arch, Olin Business Activities; provided, that such Acquired Enterprise does not have a significant portion of its gross revenues (measured at the time it is acquired by such Party) attributable to Arch Business Activities or Olin Business Activities, as the case may be. Olin or Arch may continue, after consummation of an Acquisition, the Arch Business Activities or the Olin Business Activities, as the case may be, of the Acquired Enterprise as and to the extent, in the same manner and for the same purposes that the Acquired Enterprise Engaged In such Arch Business Activities or Olin Business Activities, as the case may be, immediately prior to the consummation of the Acquisition. Notwithstanding the foregoing, neither Olin nor Arch may consummate any Acquisition or series of Acquisitions pursuant to this Section 2(d), or continue any Arch Business Activities or Olin Business Activities, as the case may be, pursuant to this Section 2(d), the purpose of which would be to evade, or that are part of a scheme, device or plan to evade, the purpose or spirit of this Agreement. 3. COVENANT NOT TO SOLICIT. ------------------------ During the Non-Solicit Term: (a) Olin agrees that it shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, (i) solicit, recruit or hire for employment, (ii) induce or encourage to leave the employment of Arch or its Subsidiaries or (iii) attempt to do any of the foregoing with respect to, any employee of Arch or its Subsidiaries, who is (other than through a violation of Section 3(b)) such during the Non- Solicit Term. 4 (b) Arch agrees that it shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, (i) solicit, recruit or hire for employment, (ii) induce or encourage to leave the employment of Olin or its Subsidiaries or (iii) attempt to do any of the foregoing with respect to, any employee of Olin or its Subsidiaries, who is (other than through a violation of Section 3(a)) such during the Non- Solicit Term. (c) Notwithstanding the foregoing, if a Party (the "Solicitor") desires to engage in any actions with respect to employees of the other Party (the "Solicitee") that would otherwise be prohibited by Sections 3(a) or 3(b) above (a "Prohibited Solicitation"), then the appropriate corporate officer in charge of human resources matters of the Solicitor shall contract the analogous corporate officer of the Solicitee and inform such Solicitee officer of such desire. Only upon the express prior written consent of the Solicitee, which consent may be withheld in the Solicitee's sole and absolute discretion, may the Solicitor engage in such Prohibited Solicitation with respect to such employee of the Solicitee. (d) Nothing in this Section 3 shall be deemed to prohibit either Party or its respective Subsidiaries from (i) making a general solicitation of employment opportunities or openings ("Opportunities") through the public media (including the Internet), (ii) posting or advertising Opportunities at any location where such Party has employees, including common areas used by the employees of both Parties or any of their respective Subsidiaries, (iii) listing any Opportunities in any government or government-sponsored job bank or opportunity center or (iv) making any dissemination required to be made by law regarding Opportunities. (e) This Section 3 shall not apply with respect to (i) any individual who is the subject of Section 4.3 of the Information Technology Services Agreement, which Section 4.3 shall preempt this Section 3 with respect to any such individual, (ii) any employee of Olin who is leased from Olin to Arch after the Distribution Date and (iii) any individual who ceases to be an employee of Olin or Arch, for the time such individual ceases to be such an employee. 4. REASONABLENESS. --------------- The Parties hereto agree that the terms contained in this Agreement are reasonable in all respects. In the event that a court determines that any of the terms or provisions of this Agreement 5 are unreasonable, the court may limit the application of any provision or term, or modify any provision or term, and proceed to enforce the Agreement as so limited or modified. 5. SEVERABILITY. ------------- The Parties hereto agree that each and every paragraph, sentence, term and provision of this Agreement shall be considered severable in that, in the event that a court finds any paragraph, sentence, term or provision to be invalid or unenforceable, the validity and enforceability, operation or effect of the remaining paragraphs, sentences, terms or provisions shall not be affected, and this Agreement shall be construed in all respects as if the invalid or unenforceable matter had been omitted. The Parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. The Parties intend the covenants of Sections 2 and 3 to be a series of separate covenants, one for each county of each and every state, province, territory or political jurisdiction of the Territory and one for each month of the period specified above. If, in any arbitration or judicial proceeding, an arbitrator or a court shall refuse to enforce any one or more of such separate covenants because the total time and/or the geographic boundaries thereof are deemed to be excessive or unreasonable, then it is the intent of the parties hereto that such covenants, which would otherwise be unenforceable due to such excessive or unreasonable period of time and/or geography, be enforced for such lesser period of time and/or for such more limited geographic area as shall be deemed reasonable and not excessive by such arbitrator or court. 6. SPECIFIC PERFORMANCE. --------------------- Each of the Parties hereto acknowledges that its covenants in this Agreement are of a special and unique character, and that there is no adequate remedy at law for failure by such Parties to comply with the provisions of this Agreement and that such failure would cause immediate harm that would not be adequately compensable in damages, and therefore agree that their covenants and agreements contained herein may be specifically enforced without the requirement of posting a bond or other security, in addition to all other remedies available to the Parties hereto under this Agreement or at law or in equity. 7. MERGER, SALE OF ASSETS, SPIN-OFF, ETC. During the Noncompete Term, -------------------------------------- neither Party shall (i) consolidate with or merge into any 6 other person, (ii) convey, transfer or lease its properties and assets substantially as an entirety to any other person or (iii) spin off, distribute the capital stock to its shareholders of, or engage in a similar divisive transaction with respect to, a subsidiary, division or any of its assets (each of the transactions described in clauses (i) through (iii) being referred to as a "Transaction"), in each case, unless: (a) The person formed (if other than Olin or Arch) by or party to such Transaction shall (x) be a corporation, (y) be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and (z) expressly assume, by an instrument satisfactory to the other Party, each and every obligation of said Party to be performed or observed hereunder; (b) The Party attempting to consummate a Transaction shall have delivered to the other Party immediately prior to the consummation of such Transaction a Certificate executed by its Chief Executive Officer and Chief Financial Officer stating that such Transaction complies with this Section 7 and that all conditions precedent herein relating to such Transaction have been complied with; and (c) Notwithstanding anything to the contrary in this Agreement, in the event that a Transaction (other than a Transaction described in clause (iii) of the first paragraph of this Section 7) is consummated, the person (other than Olin or Arch) who is a party to such Transaction (the "Acquiror"), after consummation of such Transaction may (x) in the case of a Transaction involving Olin, Engage In Arch Business Activities or (y) in the case of a Transaction involving Arch, Engage In Olin Business Activities, in either case, only as and to the extent the Acquiror Engaged In such Arch Business Activities or Olin Business Activities, as the case may be, immediately prior to such Transaction; provided, -------- however, that nothing in this Agreement shall prohibit the ------- Acquiror from expanding its Engagement In such Arch Business Activities or Olin Business Activities, as the case may be, within the scope thereof that the Acquiror Engaged In immediately prior to the consummation of such Transaction. 8. DISPUTE RESOLUTION. In the event of a controversy, dispute or claim ------------------ arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement, including, without limitation, any claim based on contract, tort, statute or constitution (collectively, "Agreement 7 Disputes"), the respective General Counsels of the Parties or their designees shall negotiate, commencing within 30 days of the occurrence of such Agreement Dispute, in good faith for a reasonable period of time to settle such Agreement Dispute. If after such reasonable period such General Counsels or their designees are unable to settle such Agreement Dispute (and in any event after 60 days have elapsed from the time the relevant parties began such negotiations), such Agreement Dispute shall be determined, at the request of any relevant party, by arbitration conducted in New York City before and in accordance with the then-existing Rules for Commercial Arbitration of the American Arbitration Association (the "Rules"), and any judgment or award rendered by the arbitrator shall be final, binding and nonappealable (except upon grounds specified in 9 U.S.C. (S)10(a) as in effect on the date hereof), and judgment may be entered by any state or Federal court having jurisdiction thereof in accordance with Section 13 hereof. Unless the arbitrator otherwise determines, the pre-trial discovery of the then-existing Federal Rules of Civil Procedure and the then-existing Rules 46 and 47 of the Rules of the United States District Court for the Southern District of New York shall apply to any arbitration hereunder. Any controversy concerning whether an Agreement Dispute is an arbitrable Agreement Dispute, whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the interpretation or enforceability of this Section 8 shall be determined by the arbitrator. The arbitrator shall be a retired or former judge of any United States District Court or Court of Appeals or such other qualified person as the relevant parties may agree to designate, provided such individual has had substantial professional experience -------- with regard to settling commercial disputes. The Parties intend that the provisions to arbitrate set forth herein be valid, enforceable and irrevocable. The designation of a situs or a governing law for this Agreement or the arbitration shall not be deemed an election to preclude application of the Federal Arbitration Act, if it would be applicable. In his award the arbitrator shall allocate, in his discretion, among the Parties to the arbitration all costs of the arbitration, including, without limitation, the fees and expenses of the arbitrator and reasonable attorneys' fees, costs and expert witness expenses of the Parties. The Parties agree to comply with any award made in any such arbitration proceedings that has become final in accordance with the Rules and agree to the entry of a judgment in any jurisdiction upon any award rendered in such proceedings becoming final under the Rules. The arbitrator shall be entitled, if appropriate, to award any remedy in such proceedings, including, without limitation, monetary damages, specific performance and all other forms of legal and equitable 8 relief; provided, however, the arbitrator shall not be entitled to -------- ------- award punitive damages. 9. ATTORNEY FEES. A Party in breach of this Agreement shall, on demand, -------------- indemnify and hold harmless the other parties hereto for and against all out-of-pocket expenses, including, without limitation, legal fees, incurred by such other Party by reason of the enforcement and protection of its rights under this Agreement. The payment of such expenses is in addition to any other relief to which such other Party may be entitled hereunder or otherwise. 10. NOTICES. -------- All notices and other communications hereunder shall be in writing and hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to the Parties at the following addresses (or at such other addresses for a Party as shall be specified by like notice) and will be deemed given on the date on which such notice is received: To Olin Corporation: 501 Merritt 7 4th Floor Norwalk, CT 06851 Attn: General Counsel To Arch Chemicals, Inc.: 501 Merritt 7 3rd Floor Norwalk, CT 06851 Attn: General Counsel 11. SUCCESSORS. ----------- This Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns. 12. APPLICABLE LAW. --------------- This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, without giving effect to its conflict of laws provisions. 9 13. CONSENT TO JURISDICTION. ------------------------ Without limiting the provisions of Section 8 hereof, each of the Parties irrevocably submits to the exclusive personal jurisdiction and venue of (a) the Circuit Court of Henrico County, Commonwealth of Virginia, and (b) the United States District Court for the Eastern District of Virginia (Richmond Division) for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the Parties agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the Eastern District of Virginia (Richmond Division) or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Circuit Court of Henrico County, Commonwealth of Virginia. Each of the Parties further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party's respective address set forth above shall be effective service of process for any action, suit or proceeding in Virginia with respect to any matters to which it has submitted to jurisdiction in this Section 13. Each of the Parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Circuit Court of Henrico County, Commonwealth of Virginia, or (ii) the United States District Court for the Eastern District of Virginia (Richmond Division), and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum, and the right to object, with respect to such action, suit or proceeding, that such court does not have jurisdiction over such Party. 14. MISCELLANEOUS. -------------- (a) AMENDMENTS. This Agreement may not be modified or amended except ----------- by an agreement in writing signed by the Parties. (b) WAIVERS. The failure of either Party to require strict -------- performance by the other party of any provision in this Agreement will not waive or diminish that Party's right to demand strict performance thereafter of that or any other provision hereof. (c) TITLE AND HEADINGS. Titles and headings to sections herein are ------------------- inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 10 (d) THIRD PARTY BENEFICIARIES. This Agreement is solely for the -------------------------- benefit of the Parties hereto and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. (e) COMPLETE AGREEMENT; CONSTRUCTION. This Agreement shall constitute -------------------------------- the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. 11 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date and year first above written. ARCH CHEMICALS, INC. By:__________________________________ Name: Title: OLIN CORPORATION By:__________________________________ Name: Title: EX-10.5 10 SUBLEASE EXHIBIT 10.5 SUBLEASE -------- THIS SUBLEASE is made as of the ___ day of __________ 1999, by and between OLIN CORPORATION, a Virginia corporation, having offices at 501 Merritt 7, Norwalk, Connecticut 06851 ("Sublandlord") and ARCH CHEMICALS, INC., a Virginia corporation, having offices at 501 Merritt 7, Norwalk, Connecticut 06581 ("Subtenant"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, pursuant to a certain Lease (as amended by that certain First Amendment of Lease dated September 18, 1995 and that certain Second Amendment of Lease dated April ____, 1998, collectively, the "Prime Lease") dated as of April 28, 1995, a copy of which is annexed hereto and made a part hereof as Exhibit A, Fifth Merritt Seven Corporation, as landlord (Merritt 7 Venture L.L.C., as successor in interest to Fifth Merritt Seven Corp. shall be hereinafter referred to as "Prime Landlord"), leased to Subtenant, as tenant, a portion of the building known as 501 Merritt Seven, Norwalk, Connecticut (the "Building"), consisting of approximately 164,017 rentable square feet and more particularly described in the Prime Lease (the "Leased Premises"); and WHEREAS, Sublandlord desires to sublease to Subtenant, and Subtenant desires to sublease from Sublandlord, a portion of the Leased Premises consisting of approximately 93,560 rentable square feet in accordance with the following terms, covenants, conditions and provisions. NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, Sublandlord and Subtenant do hereby covenant and agree as follows: 1. SUBLEASED PREMISES AND TERM. --------------------------- Subject to the provisions of this Sublease, Sublandlord hereby subleases to Subtenant, and Subtenant hereby takes and hires from Sublandlord, a portion of the Leased Premises consisting of approximately 93,560 rentable square feet, as set forth on the floor plans annexed hereto as Exhibit B-1, B-2 and B-3 (the "Subleased Premises"), for a term (the "Term") commencing February 1, 1999 (the "Commencement Date") and expiring on December 31, 2005 (the "Expiration Date"). 2. INCORPORATION BY REFERENCE. -------------------------- (a) This is a sublease and anything herein contained to the contrary notwithstanding, all terms, covenants, conditions and provisions herein are in all respects subject and subordinate to the terms, covenants, conditions and provisions of the Prime Lease and all matters to which the Prime Lease is subject and subordinate. All terms, covenants, conditions and provisions of the Prime Lease are incorporated herein as if fully set forth at length, except such as by their nature or purport are inapplicable or inappropriate to the subleasing of the Subleased Premises pursuant to this Sublease or are inconsistent with or modified by any of the provisions of this Sublease, and except that for all purposes of this Sublease, (i) whenever the word "Landlord" appears in the Prime Lease it shall be deemed to read "Sublandlord" (except when the word "Landlord" is used in respect of obtaining Landlord's consent, permission or approval, in which event the word "Landlord" shall mean both Prime Landlord and Sublandlord), (ii) whenever the word "Tenant" appears in the Prime Lease it shall be deemed to read "Subtenant", (iii) whenever the word "Lease" appears in the Prime Lease it shall be deemed to read "Sublease", and (iv) the following Articles and Sections of the Prime Lease shall not be incorporated in this Sublease: Section 1.01, 1.02, 1,04; Article 2; Article 11; Article 29; Article 31; Article 32; Article 36; Sections 37.1 through 37.12, Sections 37.14 and 37.15. (b) Notwithstanding any provision herein to the contrary: (i) the performance by Prime Landlord of its obligations under the Prime Lease, shall, for all purposes hereunder, be deemed to be the performance of such obligations by Sublandlord under the provisions of the Prime Lease incorporated herein by reference, and Sublandlord's obligations under the provisions so incorporated herein, shall be limited to the extent to which such obligations are performed by Prime Landlord under the Prime Lease and Subtenant agrees to look solely to the Prime Landlord for performance of the same; (ii) Sublandlord shall not be bound by any warranties and representations made by the Prime Landlord in the Prime Lease; (iii) whenever any provision of the Prime Lease requires the Tenant under the Prime Lease to make any payment to Prime Landlord or to take any action within a certain period of time after notice from Prime Landlord, then, Subtenant shall make its analogous payment to Sublandlord or, upon notice from Sublandlord to Subtenant, Subtenant shall take such action within said certain period of time less five (5) days; and 2 (iv) whenever any provision of the Prime Lease requiring Prime Landlord to give notice to the Tenant thereunder has been incorporated herein by reference (thus requiring Sublandlord to give such notice to Subtenant) such notice by Sublandlord to Subtenant shall for all purposes hereunder be deemed timely given if given to Subtenant within five (5) days after receipt by Sublandlord of timely notice from Prime Landlord. (c) Subtenant covenants and agrees not to violate any of the terms and provisions of the Prime Lease. Subtenant shall be bound by all of the restrictions and limitations placed upon Sublandlord, as Tenant, under the Prime Lease, as if Subtenant were the tenant thereunder. Notwithstanding anything contained to the contrary herein, Sublandlord agrees to use reasonable efforts, without any cost or expense to Sublandlord, to have the Prime Landlord perform its duties and obligations under the Prime Lease and shall cooperate with Subtenant in any proceedings as may be required to obtain from Prime Landlord any such work, services, repairs or other obligations, provided, however, that Subtenant shall indemnify and hold Sublandlord harmless from and against any loss, cost or expense, including, without limitation, reasonable attorneys fees, which may be incurred by Sublandlord in connection with such proceedings. 3. RENT. ---- (a) Subtenant shall pay fixed rent to Sublandlord at a monthly rental rate of One Hundred Nine Thousand One Hundred Fifty Three and 33/100 Dollars ($109,153.33), payable in advance, five (5) days prior to the first calendar day of each calendar month during such period, except that Subtenant shall pay the first monthly installment of fixed rent upon the execution and delivery of this Sublease; and (b) Subtenant shall pay to Sublandlord, as additional rent, Subtenant's pro-rata share of the additional rent due and payable to Prime Landlord from Sublandlord under the Articles 24 and 26 of the Prime Lease. Subtenant's pro- rata share of electrical costs shall be calculated for the Subleased Premises on the same basis that such costs are calculated for the Leased Premises under Article 24 of the Prime Lease. Subtenant's pro-rata share of operating expenses, as provided for under Article 26 of the Prime Lease shall be deemed to be 45.43%, based on the fact that the Building consists of 205,932 rentable square feet and the Subleased Premises consist of 93,560 rentable square feet. 4. DELIVERY DATE; CONDITIONS OF SUBLEASED PREMISES. ----------------------------------------------- Subtenant hereby agrees to accept possession of the 3 Subleased Premises in its present, "as is" condition. If Sublandlord is unable to deliver possession of the Subleased Premises on the Commencement Date, Sublandlord shall not be subject to any liability for failure to give possession on said date and the validity of this Sublease shall not be impaired under such circumstances, nor shall the same be construed in any wise to extend the term of this Sublease, but the rent payable hereunder shall be abated (provided Subtenant is not responsible for the inability to obtain possession) until Sublandlord delivers the Subleased Premises to Subtenant. 5. NOTICES. ------- Notices by and from Sublandlord shall be in writing and shall be sent by personal delivery or a recognized overnight express mail service to Subtenant as follows: Arch Chemicals, Inc. 501 Merritt 7 P.O. Box _________ Norwalk, CT 06856 Attn: ________________ with a copy to: ______________________ ______________________ ______________________ ______________________ Notice by and from Subtenant shall be in writing and shall be sent by personal delivery or a recognized overnight express mail service to Sublandlord as follows: Olin Corporation 501 Merritt 7 P.O. Box 4500 Norwalk, CT 06856-4500 Attn: Corporate Secretary With a copy to: Olin Corporation 501 Merritt 7 P.O. Box 4500 Norwalk, CT 06856-4500 Attn: Manager, Real Estate Either party may change the address for notice by notice to the other given in accordance with the terms hereof. 4 6. BROKER ------ Subtenant covenants and represents it has dealt with no broker, finder or other like agent in connection with the negotiation or consummation of this Sublease, and that no conversations or negotiations were had with any broker, finder or other like agent concerning the subletting of the Subleased Premises. Subtenant agrees to hold Sublandlord harmless against any claims for a brokerage commission arising out of any conversations or negotiations had by Subtenant with any broker, finder or other like agent. 7. INSURANCE. --------- Whenever any insurance coverage is required to be obtained or maintained by the Tenant under the Prime Lease, Subtenant shall obtain and maintain such insurance coverage naming as insureds therein Prime Landlord, Sublandlord, as their respective interests may appear, and any other party required to be named under the provisions of the Prime Lease. 8. CONFLICT OR INCONSISTENCY. ------------------------- In case of any conflict or inconsistency between the provisions of the Prime Lease and this Sublease, the provisions of this Sublease, as between Sublandlord and Subtenant, shall control. 9. GOVERNING LAW. ------------- This Sublease shall be governed in all respects by the laws of the State of Connecticut. 10. PRIME LANDLORD'S CONSENT. ------------------------ This Sublease is subject to obtaining written consent of Prime Landlord ("Prime Landlord's Consent"), and shall not be effective unless and until such consent is obtained. In the event that Prime Landlord's Consent is not obtained on or before the Commencement Date, unless such date shall be extended by mutual agreement of the parties, this Sublease shall automatically cease and terminate, without any further notice, and all monies paid by Subtenant to Sublandlord shall be returned to Subtenant. Whenever the terms of this Sublease require the consent or approval of Sublandlord, the consent or approval of the Prime Landlord shall also be required, except to the extent expressly provided for otherwise in the Prime Lease, this Sublease or Prime 5 Landlord's Consent. 11. PARKING. ------- The provisions of Article 30 of the Prime Lease which have been incorporated herein by reference constitute a part of this Sublease, except that the number of reserved spaces to which Subtenant is entitled is five (5) for handicap/medical use, twelve (12) for fleet vehicles and seven (7) for van pool vehicles. 12. ROOF RIGHTS. ----------- Sublandlord shall use reasonable efforts to obtain for Subtenant an equitable share of the "Roof Rights" as provided for, and subject to the terms of Section 37.12 of the Prime Lease, so long as Subtenant's use thereof does not interfere with Sublandlord's use of such rights. 13. DOWNSIZING. ----------- Upon receipt of written notice from Subtenant, Sublandlord shall use reasonable efforts to obtain for Subtenant an equitable share of the "downsizing" rights as provided for, and subject to all of the terms of Section 37.08 of the Prime Lease. Sublandlord shall conduct all negotiations and discussions with the Prime Landlord and shall keep Subtenant reasonably appraised of the status thereof. Subtenant shall indemnify and hold harmless Sublandlord from and against all costs, expenses and liabilities arising from Sublandlord's activities in connection with a "downsizing" request by Subtenant. 14. TERMINATION. ------------ If Sublandlord and Subtenant have both agreed, in writing, to seek a termination of the Prime Lease in accordance with Section 37.02 thereof, Sublandlord shall act on behalf of the parties in implementing such termination. Subtenant shall indemnify and hold harmless Sublandlord from and against Subtenant's equitable share of all costs, expenses and liabilities arising from Sublandlord's activities in connection with such termination of the Prime Lease. 15. HOLDOVER TENANCY. ---------------- If Subtenant holds possession of the Subleased Premises after the Expiration Date, Subtenant shall become a tenant at sufferance upon all of the terms contained herein, except as to Sublease Term and Rent. During such holdover period, if Sublandlord is independently holding over its portion of the Leased Premises, 6 Subtenant shall pay to Sublandlord a monthly rental equivalent to One Hundred Twenty-Five percent (125%) of the fixed rent payable by Subtenant to Sublandlord under section 3(a) of this Sublease. If Sublandlord is not independently holding over its portion of the Leased Premises, Subtenant shall pay rent as aforesaid plus all costs and expenses, including attorney's fees, incurred by Sublandlord as the result of Subtenant's holdover. 16. SURRENDER. --------- On the last day of the Term, Subtenant shall quit and surrender the Subleased Premises to Sublandlord broom clean, in good order, condition and repair except for ordinary wear and tear and damage by fire or other insured casualty. Subtenant shall remove all Subtenant's property in the Subleased Premises, and Sublandlord may monitor and/or videotape Subtenant's move-out. IN WITNESS WHEREOF, this Sublease has been duly executed by the parties hereto as of the day and year first above written. SUBLANDLORD: OLIN CORPORATION ___________________ Name: By: __________________________ ___________________ Name: Name: Title: SUBTENANT: ARCH CHEMICALS, INC. ___________________ Name: By: __________________________ ___________________ Name: Name: Title: 7 EXHIBIT A --------- The Prime Lease 8 EXHIBIT B 4 PAGES ----------- Floor Plan of Subleased Premises 9 EX-10.6 11 EMPLOYEE BENEFITS ALLOCATION AGREEMENT EXHIBIT 10.6 ================================================================================ EMPLOYEE BENEFITS ALLOCATION AGREEMENT BETWEEN OLIN CORPORATION AND ARCH CHEMICALS, INC. DATED AS OF [ ], 1999 ================================================================================ TABLE OF CONTENTS ARTICLE I Definitions ----------- Section 1.1. General.............................. 1 ARTICLE II U.S. Plans and Stock Plans -------------------------- Section 2.1. Qualified Retirement Plan............ 8 Section 2.2. Supplemental Retirement Plans and Employment Agreements................ 10 Section 2.3. Qualified Defined Contribution Plan.. 11 Section 2.4. Welfare Plans........................ 12 Section 2.5. Options.............................. 15 Section 2.6. Executive and Director Compensation Plans................................ 18 ARTICLE III Foreign Plans ------------- Section 3.1. General Principles................... 19 Section 3.2. Exceptions to General Principles..... 20 ARTICLE IV General Provisions ------------------ Section 4.1. Employment Transfers; Severance Pay.. 20 Section 4.2. Recognition of Olin Employment Service, Etc......................... 21 Section 4.3. Workers' Compensation................ 21 ARTICLE V Miscellaneous ------------- Section 5.1. Guarantee of Subsidiaries' Obligations.......................... 22 Section 5.2. Disputes............................. 22 Section 5.3. Sharing of Information............... 22 Section 5.4. Termination.......................... 23 Section 5.5. Rights to Amend or Terminate Plans; No Third Party Beneficiaries......... 23 Section 5.6. Complete Agreement................... 23 Section 5.7. Governing Law........................ 23 Section 5.8. Notices.............................. 23 Section 5.9. Amendment and Modification........... 23 Section 5.10. Successors and Assigns............... 23 Section 5.11. Consent to Jurisdiction.............. 23 Section 5.12. Counterparts......................... 24 Section 5.13. Interpretation....................... 24 Section 5.14. Legal Enforceability................. 24 Section 5.15. References, Construction............. 25 EMPLOYEE BENEFITS ALLOCATION AGREEMENT, dated as of [ ], 1999, by and between Olin Corporation, a Virginia corporation ("Olin"), and Arch Chemicals, Inc., a Virginia corporation ("Arch"). W I T N E S S E T H: WHEREAS Olin and Arch have entered into that certain Distribution Agreement dated as of the date hereof, between Olin and Arch (the "Distribution Agreement"), providing for the distribution to the holders of the issued and outstanding shares of common stock, par value $1.00 per share, of Olin ("Olin Common Stock") all of the issued and outstanding shares of common stock, par value $1.00 per share, of Arch ("Arch Common Stock"); WHEREAS the Distribution is intended to qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS the Distribution Agreement, among other things, sets forth the principal corporate transactions required to effect the Distribution and sets forth other agreements that will govern certain other matters prior to and following the Distribution; and WHEREAS in connection with the Distribution and pursuant to the Distribution Agreement, Olin and Arch desire to provide for the allocation of assets and Liabilities and other matters relating to employee benefit plans and compensation arrangements. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I Definitions ----------- Section 1.1. General. Any capitalized terms that are used in this -------- Agreement but not defined herein (other than the names of Olin employee benefit plans) shall have the meanings set forth in the Distribution Agreement, and, as used herein, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): 2 "Agreement": this Employee Benefits Allocation Agreement. --------- "Alternate Payee": an alternate payee under a domestic relations --------------- order which has been determined by the appropriate Plan administrator to be qualified under Section 414(p) of the Code and Section 206(d) of ERISA and which creates or recognizes an alternate payee's right to, or assigns to an alternate payee, all or a portion of the benefits payable to a participant under any Plan, or an alternate recipient under a medical child support order which has been determined by the appropriate Plan administrator to be qualified under Section 609(a) of ERISA and which creates or recognizes the existence of an alternate recipient's right to, or assigns to an alternate recipient the right to, receive benefits for which a participant or beneficiary is eligible under any Plan. "Arch": defined in the preamble. ---- "Arch Common Stock": defined in the recitals. ----------------- "Arch Employee": any individual who is, as of the Distribution Date, ------------- identified on the records of Arch as being, an Employee of any member of the Arch Group (including an individual who is receiving long-term disability benefits on the Distribution Date and whose most recent active employment was with any member of the Pre-Distribution Group in the Arch Business). If such an individual has received notice of layoff or termination from Olin or any of its Affiliates prior to the Distribution Date, he or she shall not be considered to be an Arch Employee on the Distribution Date except for those individuals listed on Schedule A hereto. "Arch Foreign Plan": a Foreign Plan provided by, contributed to or ----------------- sponsored by one or more members of the Arch Group. "Arch Former Employee": any individual who is, as of the Distribution -------------------- Date, identified on the records of Olin as being an Arch Former Employee, which identification shall have been made based upon a good faith determination by Olin and Arch that (i) such individual was, at any time before the Distribution Date, an employee of any member of the Pre-Distribution Group, (ii) such individual is not an Olin Employee or an Arch Employee, and (iii) such individual's most recent active employment was with any such member of the Arch Business; provided that, if at any time on or before December 31, 1999, Arch and -------- Olin determine that any one or more individuals were identified as Arch Former 3 Employees in error and should have been identified as Olin Former Employees and agree to correct such error, such individuals shall be considered Olin Former Employees and Arch and Olin shall use their reasonable best efforts to implement the terms of this Agreement as they apply to such individuals as if such individuals had been correctly identified as of the Distribution Date. "Arch Group": Arch and its Subsidiaries after the Distribution. ---------- "Arch Option": an option to purchase from Arch shares of Arch Common ----------- Stock provided to an Arch Participant or an Olin Participant pursuant to Section 2.5. "Arch Participant": any individual who is an Arch Employee, an Arch ---------------- Former Employee, or a Beneficiary of such an individual. "Arch Ratio": the amount obtained by dividing (i) the opening price ---------- on the first day of regular way trading of the Arch Common Stock on the NYSE Composite Tape, as reported in The Wall Street Journal, by (ii) the closing price on the last day of trading of Olin Common Stock with due bills on the NYSE Composite Tape, as reported in The Wall Street Journal. "Arch Restricted Stock Units": units representing shares of Arch --------------------------- Common Stock granted pursuant to an Arch Plan. "Arch SAR": a stock appreciation right granted with respect to Arch -------- Common Stock in accordance with Section 2.5. "Arch SIP": the Qualified Plan established by Arch pursuant to -------- Section 2.3(a). "Arch U.S. Welfare Plan": an Arch Welfare Plan that is a U.S. Plan. ---------------------- "Arch Welfare Plan": a Welfare Plan sponsored by one or more members ----------------- of the Arch Group. "Assigned Split Dollar Policies": defined in Section 2.4(c). ------------------------------ "Beneficiary": a beneficiary, dependent or Alternate Payee or estate ----------- of a participant in a Plan, in each case in his, her or its capacity as such a beneficiary, dependent, Alternate Payee or estate. 4 "Code": defined in the recitals. ---- "Deferred Compensation Plan": a Plan, other than a Qualified Plan or -------------------------- a Supplemental Retirement Plan, providing deferred compensation. "Distribution Agreement": defined in the recitals. ---------------------- "Distribution Ratio": the ratio of one share of Arch Common Stock to ------------------ two shares of Olin Common Stock. "Employee": with respect to any entity, an individual who is -------- considered, according to the payroll and other records of such entity, to be employed by such entity, regardless of whether such individual is, at the relevant time, actively at work or on leave of absence (including vacation, holiday, sick leave, family and medical leave, disability leave, military leave, jury duty, and any other leave of absence or similar interruption of active employment that is not considered, according to the policies or practices of such entity, to have resulted in a permanent termination of such individual's employment). "Enrolled Actuary": with respect to all U.S. Plans, The Segal ---------------- Company, and, with respect to all Foreign Plans, an enrolled actuary or other party making actuarial or similar determinations pursuant to this Agreement with respect to assets or Liabilities relating to a particular employee benefit plan selected by Olin with the approval of Arch, which approval shall not be unreasonably withheld. "ERISA": the Employee Retirement Income Security Act of 1974, as ----- amended, or any successor legislation, and the regulations promulgated thereunder. "Foreign Plan": any Plan maintained outside of the United States ------------ primarily for the benefit of individuals substantially all of whom are nonresident aliens with respect to the United States. "New Olin Option": defined in Section 2.5(b). --------------- "Olin": defined in the preamble. ---- "Olin CEOP": the Olin Corporation Contributing Employee Ownership --------- Plan. "Olin CEOP Trust": the trust established to fund the Olin CEOP. --------------- 5 "Olin Common Stock": defined in the recitals. ----------------- "Olin Employee": any individual who is, as of the Distribution Date, ------------- identified on the records of Olin as being an Employee of any member of the Olin Group (excluding an individual who is receiving long-term disability benefits on the Distribution Date and whose most recent active employment was with any member of the Pre-Distribution Group in the Arch Business); provided, however, -------- ------- that an Employee of Olin or its Affiliates on the Distribution Date who becomes a Subsequent Arch Employee shall not be considered an Olin Employee once he or she becomes a Subsequent Arch Employee. "Olin Foreign Plan": a Foreign Plan provided by, contributed to or ----------------- sponsored by one or more members of the Olin Group. "Olin Former Employee": any individual who was, at any time before -------------------- the Distribution Date, an Employee of any member of the Pre-Distribution Group, and who is not an Olin Employee, an Arch Employee or an Arch Former Employee; provided that, if at any time on or before December 31, 1999, Arch and Olin determine that any one or more individuals were identified as Olin Former Employees in error and should have been identified as Arch Former Employees, and agree to correct such error, such individuals shall be considered Arch Former Employees, and Arch and Olin shall use their reasonable best efforts to implement the terms of this Agreement as they apply to such individuals as if such individuals had been correctly identified as of the Distribution Date. "Olin Group": Olin and its Subsidiaries after the Distribution. ---------- "Olin Incentive Plans": collectively, the 1980 Stock Option Plan for -------------------- Key Employees of Olin Corporation and Subsidiaries (the "1980 Olin Stock Option Plan"); the 1988 Stock Option Plan for Key Employees of Olin Corporation and Subsidiaries (the "1988 Olin Stock Option Plan"); the 1996 Stock Option Plan for Key Employees of Olin Corporation and Subsidiaries (the "1996 Olin Stock Option Plan"); and the Olin 1991 Long-Term Incentive Plan, each as in effect on the Distribution Date. "Olin Option": an option to purchase shares of Olin Common Stock ----------- granted pursuant to any of the Olin Incentive Plans. 6 "Olin Participant": any individual who is an Olin Employee, an Olin ---------------- Former Employee, or a Beneficiary of such an individual. "Olin Pension Plan": the Olin Corporation Employees Pension Plan. ----------------- "Olin Ratio": the amount obtained by dividing (i) the opening price ---------- of Olin Common Stock on the first day of trading ex-dividend (the trading day after due bill trading ends) on the NYSE Composite Tape, as reported in The Wall Street Journal, by (ii) the closing price on the last day of trading of Olin Common Stock with due bills on the NYSE Composite Tape, as reported in The Wall Street Journal. "Olin Restricted Stock Units": units representing restricted shares --------------------------- of Olin Common Stock granted pursuant to, and subject to forfeiture under, any of the Olin Incentive Plans. "Olin Supplemental Plans": collectively, the Olin Corporation Senior ----------------------- Executive Benefit Plan, the Olin Supplementary Pension Plan, Olin Deferral Benefit Pension Plan and the Olin Supplemental Contributory Employee Ownership Plan, each as in effect on the Distribution Date. "Olin U.S. Welfare Plan": any Olin Welfare Plan that is a U.S. Plan. ---------------------- "Olin Welfare Plan": any Welfare Plan of one or more members of the ----------------- Olin Group. "Plan": any written or unwritten plan, policy, program, payroll ---- practice, ongoing arrangement, trust, fund, contract, insurance policy or other agreement or funding vehicle provided by, contributed to or sponsored by one or more members of the Olin Group or the Arch Group, providing benefits to Olin Participants or Arch Participants, regardless of whether it is mandated under local law or negotiated or agreed to as a term or condition of employment or otherwise, and regardless of whether it is governmental, private, funded, unfunded, financed by the purchase of insurance, contributory or noncontributory. "Pre-Adjustment Option": defined in Section 2.5(b). --------------------- "Pre-Distribution Group": the Olin Group and the Arch Group together, ---------------------- as in effect immediately prior to the Distribution Date. 7 "Qualified Plan": a Plan that is an "employee pension benefit plan" -------------- as defined in Section 3(2) of ERISA that constitutes, or is intended in good faith to constitute, a qualified plan under Section 401(a) of the Code. "Retained Arch Inactive Participant": any Arch Former Employee who is ---------------------------------- a retired or terminated vested participant in the Olin Pension Plan whose termination under the Olin Pension Plan occurred prior to the Distribution Date, or a Beneficiary of any such Arch Former Employee. "Subsequent Arch Employee": any individual who is identified as an ------------------------ Olin Employee as of the Distribution Date but who becomes an Employee of any member of the Arch Group after the Distribution Date but on or prior to January 31, 2000. An individual ceases to be an Olin Employee when he or she becomes a Subsequent Arch Employee. "Subsequent Olin Employee": any individual who is identified as an ------------------------ Arch Employee as of the Distribution Date but who becomes an Employee of any member of the Olin Group after the Distribution Date but on or prior to January 31, 2000. An individual ceases to be an Arch Employee when he or she becomes a Subsequent Olin Employee. "Successor Plan": defined in Section 2.1(a). -------------- "Supplemental Employment Agreement": any written enforceable --------------------------------- agreement (other than Tier I Executive Agreements and Tier II Change in Control Agreements) between any member of the Pre-Distribution Group and any single Olin Employee, Olin Former Employee, Arch Employee or Arch Former Employee providing for post-retirement income, pension or welfare benefits (other than pursuant to a Welfare Plan, a Qualified Plan or a Supplemental Retirement Plan). "Supplemental Retirement Plan": a U.S. Plan that is (i) an "employee ---------------------------- pension benefit plan" within the meaning of Section 3(2) or ERISA but is not a Qualified Plan, or (ii) an excess benefit plan under ERISA, including the Olin Supplementary Pension Plan, Olin Corporation Senior Executive Benefit Plan and the Olin Supplemental Contributing Employee Ownership Plan. "U.S. Plan": any Plan that is not a Foreign Plan. --------- "Welfare Plan": any Foreign Plan or U.S. Plan that is an "employee ------------ welfare benefit plan" as defined in Section 3(l) of ERISA (whether or not such plan is subject to ERISA). 8 ARTICLE II U.S. Plans and Stock Plans -------------------------- Section 2.1. Qualified Retirement Plan. Olin and Arch shall take all -------------------------- steps necessary or appropriate so that the provisions of this Section 2.1 are implemented in a timely fashion, as more fully set forth below. (a) Establishment of Successor Plan. On or prior to the Distribution -------------------------------- Date, Arch shall establish a defined benefit pension plan that is a Qualified Plan (the "Successor Plan") that contains terms substantially similar to the terms in the Olin Pension Plan for the benefit of Arch Employees and Subsequent Arch Employees. Arch agrees that each Arch Employee or Subsequent Arch Employee shall (i) immediately become eligible to participate in the Successor Plan as of the Distribution Date (or in the case of a Subsequent Arch Employee, as of the date of transfer) and (ii) for all purposes (other than eligibility) under the Successor Plan, be entitled to service, compensation and the accrued benefit credited to such Arch Employee as of the Distribution Date (or in the case of a Subsequent Arch Employee, as of the date of transfer) under the terms of the Olin Pension Plan as if such service had been rendered to Arch, as if such compensation had been paid by Arch and as if such accrued benefit had originally been credited to such Arch Employee or Subsequent Arch Employee under the Successor Plan. (b) Transfer of Assets and Liabilities to the Successor Plan. --------------------------------------------------------- Subject to the completion of the asset transfer described in the next paragraph, Olin shall arrange for the transfer from the Olin Pension Plan to the Successor Plan and the Successor Plan shall assume and be responsible for all Liabilities of the Olin Pension Plan with respect to benefits accrued by Arch Employees and Subsequent Arch Employees (including disability pensions) through the Distribution Date (or through the date of transfer in the case of a Subsequent Arch Employee) and, effective upon such transfer, the members of the Olin Group shall have no further responsibility for such Liabilities. All Liabilities of the Olin Pension Plan attributable to Retained Arch Inactive Participants shall be retained by the Olin Pension Plan and the members of the Arch Group shall have no responsibility for such Liabilities. As soon as practicable after the Distribution Date, Olin shall cause to be transferred from the trust established under the Olin Pension Plan to the trust established under the Successor Plan a portion of the assets 9 thereof, as provided hereinbelow. As soon as practical following the Distribution Date, the Enrolled Actuary will estimate preliminarily the amount of assets to be transferred by multiplying the fair market value of the assets in the trust established under the Olin Pension Plan as of the Distribution Date by the ratio of (x) the Liabilities attributable to Arch Employees which shall be equal to the projected benefit obligations determined as of the Distribution Date of Arch Employees who are participants in the Olin Pension Plan to (y) all Liabilities under the Olin Pension Plan which shall be equal to the projected benefit obligations determined as of the Distribution Date of all participants in the Olin Pension Plan (including Arch Former Employees and Olin Former Employees). Projected benefit obligations will be determined based on the assumptions used for purposes of Financial Accounting Standards No. 87 in the disclosure footnote in Olin's 1998 Annual Report to Shareholders (the "FAS 87 Assumptions"). In no event will the amount determined to be transferrable be less than the amount of assets required to be transferred pursuant to Code Section 414(l) as a result of the transfer to and assumption of Liabilities by the Successor Plan, as reasonably and equitably determined by the Enrolled Actuary using the asset allocation methodology set forth in Section 4044 of ERISA, the PBGC safe harbor assumptions referred to in Treasury Regulation Section 1.414(l)-1(b)(5)(ii) and the pre-retirement withdrawal assumption used by Olin in the above-referenced FAS-87 disclosure. As soon as practicable after the Distribution Date and after receipt of the opinion of counsel described in Section 2.1(d) hereof, Olin shall cause 85% of the amount determined above (increased by interest at the settlement rate included in the FAS-87 Assumptions from the Distribution Date to the date of such transfer) to be transferred from the trust under the Olin Pension Plan to the trust established under the Successor Plan (the "Initial Transfer"). On or about August 31, 1999, Olin will cause an additional amount to be transferred to the trust established under the Successor Plan (the "Subsequent Transfer") equal to the excess of (i) the actual amount to be transferred as determined by the Enrolled Actuary using the methodology described above, over (ii) the amount previously transferred provided that such amount will be credited with interest at the settlement rate included in the FAS-87 Assumptions from the date of the Initial Transfer to the date of the Subsequent Transfer and shall be reduced by all benefit payments paid from the Olin Pension Plan to Arch Employees who retire or otherwise terminate employment on or after the Distribution Date but prior to the date of actual transfer. 10 On or about February 1, 2000, the Enrolled Actuary will determine a net amount ("Net Amount") equal to the greater of the (i) the excess of (A) the additional assets and related Liabilities that are required to be transferred to the trust established under the Successor Plan from the trust established under the Olin Pension Plan as a result of Olin Employees who become Subsequent Arch Employees over (B) the additional assets and related Liabilities that should be transferred to the trust established under the Successor Plan to the trust established under the Olin Plan as a result of Arch Employees who become Subsequent Olin Employees or (ii) the excess of (B) above over (A). Such Liabilities will be based on the individual's accrued benefit under the applicable plan as of the date of transfer of such individual. The assets representing the Net Amount to be transferred from the appropriate trust shall be based on the same proportionate percentage as applied in the preceding paragraph; provided, however, that in any event the amounts to be transferred -------- ------- will not be less than the amount required to comply with Code Section 414(l). Interest (at the same rate as was used for the initial transfer) shall be credited on the Net Amount and transferred along with the Net Amount to the trust that will be receiving the transfer. (c) Union Contracts. Arch shall honor and assume all rights and ---------------- obligations of Olin, and shall become the successor employer under union contracts covering Arch Employees and such employees will be eligible to participate in the Successor Plan subject to the provisions of any union consent required to implement paragraph (a) of this Section 2.1. (d) Implementation. Arch and Olin shall, in connection with the --------------- actions taken pursuant to this Section 2.1, cooperate in making any and all appropriate filings required under the Code or ERISA, and the regulations thereunder and any applicable securities laws, implementing all appropriate communications with participants, transferring appropriate records, and taking all such other actions as may be necessary and appropriate to implement the provisions of this Section 2.1 in a timely manner and to cause the transfer of assets pursuant to Section 2.1(b) to take place as soon as practicable after the Distribution Date (or in the case of a Subsequent Arch Employee, as soon as practicable following January 31, 2000); provided, however, that such transfer -------- ------- shall not take place until Olin receives an opinion of counsel satisfactory to Olin (or a copy of a favorable determination letter from the Internal Revenue Service) to the effect that the Successor Plan is in form qualified under Section 401(a) of the Code, and the 11 related trust is in form exempt under Section 501(a) of the Code. Section 2.2. Supplemental Retirement Plans and Employment Agreements. -------------------------------------------------------- (a) Establishment of Successor Supplemental Retirement Plans. On or prior to --------------------------------------------------------- the Distribution Date, Arch shall establish nonqualified Supplemental Retirement Plans for the benefit of Arch Employees and Subsequent Arch Employees that will contain terms that are substantially similar to those contained in the Olin Supplemental Plans. Arch agrees that each Arch Employee and Subsequent Arch Employee shall, for all purposes under the Supplemental Retirement Plans, be entitled to service, compensation and the accrued benefit (or account balance, as the case may be) credited to such Arch Employee as of the Distribution Date (or in the case of a Subsequent Arch Employee, the date of transfer) under the terms of the Olin Supplemental Plans as if such service had been rendered to Arch, as if such compensation had been paid by Arch and as if such accrued benefit (or account balance) had originally been credited to such Arch Employee under the Supplemental Retirement Plans of Arch provided that in the case of a Subsequent Arch Employee who is participating in an Arch Supplemental Retirement Plan that is a defined benefit plan, his or her benefit from such plan shall be offset by the benefit payable (regardless of whether or not actually paid) under the comparable Olin Supplemental Plan (assuming the terms of which do not change after the Distribution Date). All reserves and liabilities held under the Olin Supplemental Plans with respect to Arch Employees (who are determined to be Arch Employees on the Distribution Date) shall be transferred to Arch. Arch shall be responsible for all claims arising under the Supplemental Retirement Plans with respect to Arch Employees whether incurred before, on or after the Distribution Date and the Olin Group shall have no responsibility for such claims. All reserves and Liabilities determined through the date of transfer held under the Olin Supplemental Plans with respect to Subsequent Arch Employees shall remain with Olin. To the extent an Arch Employee becomes a Subsequent Olin Employee, any reserves and Liability for such Arch Employee under such Arch Supplemental Retirement Plan through the date of transfer shall be retained by Arch and if such individual is participating in an Olin Supplemental Plan that is a defined benefit plan, his or her benefit from such plan shall be offset by the benefit payable (regardless of whether or not actually paid) under the comparable Arch Supplemental Retirement Plan (assuming the terms which do not change after the Distribution Date). Olin shall include similar provisions in the Olin Supplemental Plans for Subsequent 12 Olin Employees as the Arch Supplemental Retirement Plans include for Subsequent Arch Employees. (b) Olin's Supplemental Plans. Effective as of the Distribution -------------------------- Date, Olin shall continue to sponsor the Olin Supplemental Plans, subject to the terms thereof. Olin hereby retains all liability for benefits (whether funded or unfunded) that have accrued prior to the Distribution Date under the Olin Supplemental Plans with respect to Arch Former Employees. (c) Supplemental Employment Agreements. Effective as of the ----------------------------------- Distribution Date, Arch shall assume and be solely responsible for all Liabilities of the Pre-Distribution Group relating to Supplemental Employment Agreements with Arch Employees. Arch and Olin shall cooperate in taking all actions necessary or appropriate to implement the foregoing, including amending any Supplemental Employment Agreement and obtaining any necessary consents of affected individuals. Section 2.3. Qualified Defined Contribution Plan. (a) Olin CEOP. ------------------------------------ ---------- As of the Distribution Date, Olin and Arch will take such steps as are necessary or desirable to convert the Olin CEOP into a multiple employer plan in which both Olin and Arch shall be participating employers. On and after the Distribution Date, employer contributions made on behalf of Arch Employees will be made solely by Arch. As of a date to be determined by Arch which may not be more than two years after the Distribution Date, Arch shall establish an Arch SIP and shall no longer participate in the Olin CEOP. Under the multiple employer plan, Arch Employees will become 100% vested in matching contributions following completion of five years of service (including prior service with Olin). Arch Common Stock received by Olin Employees in the Olin CEOP as a result of the Distribution that is attributable to (i) Olin contributions made before the Distribution may be retained in Arch Common Stock or reinvested in Olin Common Stock at the participant's election at any time and (ii) employee contributions may be retained in Arch Common Stock or reinvested in any other available option under the Olin CEOP at the participant's election at any time. Except as provided in the preceding sentence, contributions made to or held under the Olin CEOP on behalf of Olin Employees may not be invested in Arch Common Stock. Dividends on Arch Common Stock in accounts of Olin Employees will be reinvested in Olin Common Stock. Olin Common Stock held in the accounts of Arch Employees that is attributable to (i) Olin contributions made before the Distribution may be retained in Olin Common Stock or reinvested only in Arch Common Stock at the participant's 13 election and (ii) employee contributions may be retained in Olin Common Stock or reinvested in any other available option under the Olin CEOP at the participant's election. Except as provided in the preceding sentence, contributions after the Distribution Date made to or held under the Olin CEOP on behalf of Arch Employees may not be invested in Olin Common Stock. Dividends on Olin Common Stock in accounts of Arch Employees will be reinvested in Arch Common Stock. (b) Implementation. Olin and Arch shall cooperate in making all --------------- appropriate filings required under the Code or ERISA, and the regulations thereunder and any applicable securities laws, implementing all appropriate communications with participants, maintaining, and transferring appropriate records, and taking all such other actions as may be necessary and appropriate to implement the provisions of this Section 2.3. Section 2.4. Welfare Plans. (a) Pre-Retirement Welfare Plans. Arch -------------- ----------------------------- shall take, and shall cause the other members of the Arch Group to take, all actions necessary or appropriate to establish, on or before the Distribution Date, Arch U.S. Welfare Plans to provide each Arch Employee and Subsequent Arch Employee in the United States with benefits substantially similar to the benefits provided to him or her under the Olin U.S. Welfare Plans. The Arch Group shall assume, and shall be solely responsible for, all Liabilities in connection with unpaid health care and short-term and long-term disability claims by or in respect of Arch Employees in the United States for benefits under the Olin Welfare Plans whether incurred before, on or after the Distribution Date and the Olin Group shall have no responsibility for such claims. With respect to Subsequent Arch Employees, the Olin Group shall assume, and shall be solely responsible for all Liabilities in connection with unpaid health care and short-time and long-term disability incurred claims by or in respect of such individuals prior to their transfer to any member of the Arch Group and Arch shall be responsible for such claims incurred by or in respect of such individuals on or subsequent to such transfer. With respect to other benefits provided under Olin Welfare Plans (including job transition benefits, accidental death benefits, group-term life insurance and tuition aid): (i) the Arch Group shall assume, and shall be solely responsible for, all Liabilities for such claims payable to Arch Employees and/or Subsequent Arch Employees where the event giving rise to the claim occurs on or after the Distribution Date (or on or after the date of transfer for Subsequent Arch Employees) and the Olin Group shall have no responsibility for such claims and (ii) the Olin Group shall assume, and be responsible for such claims payable to 14 (A) Arch Participants and Subsequent Arch Employees where the event giving rise to the claim occurs prior to the Distribution Date (or in the case of a Subsequent Arch Employee, prior to the date of transfer) and (B) Olin Participants whether the claim incurred before, on or after the Distribution Date; and the Arch Group shall have no responsibility for such claims. Claims for tuition aid benefits shall be considered incurred when the semester or course is successfully completed. Olin shall take all actions necessary or appropriate to transfer a proportionate share of the assets held under the voluntary employee benefit association trust ("VEBA") maintained by Olin and attributable to long-term disability benefits to a VEBA established by Arch. Such proportionate share shall be equal to the product of (i) the fair market value of the assets in the VEBA as of the Distribution Date earmarked for long-term disability benefits and (ii) the ratio of the Liabilities for long-term disability benefits attributable to Arch Employees to the Liabilities for long-term disability benefits for Olin Employees, Olin Former Employees, Arch Employees and Arch Former Employees. In determining such Liabilities, a 7-1/2% interest assumption shall be used. Olin shall transfer the same proportionate share of reserves on its books to Arch for such long-term disability benefits. Olin shall retain responsibility for continuation health coverage benefits under the Olin Welfare Plans for Arch Former Employees providing health benefits under ERISA section 601(a) whether the claims are incurred before, on or after the Distribution Date. (b) Flexible Spending Account Plan. Prior to the Distribution Date, ------------------------------- Arch shall establish a flexible spending account plan (which shall provide benefits substantially similar to the Flexible Spending Account Plan of Olin Corporation) to assume Liabilities of Arch Employees and Subsequent Arch Employees in the Flexible Spending Account Plan of Olin Corporation. As soon as practicable after the Distribution Date (or in the case of a Subsequent Arch Employee, the date of transfer), Olin shall transfer to Arch an amount equal to the monies deducted from the compensation of such individuals during the calendar year in which the Distribution Date occurs reduced by the amount of benefits paid under such plan during such year. Olin and Arch shall take all other action necessary or appropriate so that, effective as of the Distribution Date, Arch shall assume and be solely responsible for all flexible spending account Liabilities of such individual under its flexible spending account plan. Olin shall retain liability for Arch Former Employees and for any claims incurred in the calendar year 15 preceding the year of the Distribution under the Flexible Spending Account Plan of Olin Corporation. (c) Assigned Split Dollar and Corporate-Owned Life Insurance -------------------------------------------------------- Policies. Olin and Arch shall take all actions necessary or appropriate to - --------- assign to Arch, effective as of the Distribution Date, all of the rights and interests of the Pre-Distribution Group in the split dollar life insurance policies insuring the lives of Arch Participants pursuant to the Split Dollar Life Insurance Program (such policies, the "Assigned Split Dollar Policies"). Such actions shall include Arch's acceptance of any collateral assignments, policy endorsements or such other documentation executed by or on behalf of such Arch Participants or any trustee of any trust to which any Arch Participant's policy rights or incidents of ownership under the Assigned Split Dollar Policies have been assigned, and Arch's entering into such agreements as may be necessary to fulfill any obligations of Olin to any insurance company or insurance agent or broker under Assigned Split Dollar Policies. From and after the date of the assignment of any Assigned Split Dollar Policy to Arch, Arch shall assume and be solely responsible for all Liabilities, and shall be entitled to all benefits, of the Pre-Distribution Group to the applicable Arch Participant under his or her Split Dollar Policy, including under any related agreements entered into by such Arch Participant or any such trustee. Olin shall retain and pay any premiums or take any action required to keep any corporate-owned life insurance ("COLI") insuring the lives of Arch Participants in force. Olin shall be entitled to the life insurance proceeds when payable and Olin shall pay the related $5,000 to the Arch Participant's Beneficiary when payable in accordance with COLI plan provisions. For purposes of COLI, the Arch Participant will be deemed to be an Olin Employee. (d) Post-Retirement Medical and Life Insurance Benefits. Effective ---------------------------------------------------- as of the Distribution Date, Olin shall continue to sponsor the retiree medical benefit and life insurance plans of Olin. Olin agrees that it will retain all liability with respect to medical and life insurance benefits provided to Arch Former Employees who retired or otherwise terminated prior to the Distribution Date. Effective as of the Distribution Date, Arch shall adopt a medical benefit plan substantially similar to Olin's retiree benefits plan program. Such plan shall provide credit to Arch Employees and Subsequent Arch Employees for service with Olin on the same basis as credit for such service was provided under Olin's plan. Other than possible increases in employee contributions, Arch agrees that the benefits 16 provided under its retiree medical benefits program shall not be reduced or terminated prior to the fifth anniversary of the Distribution Date. Arch hereby agrees to assume, and shall indemnify and hold Olin harmless from and against, all claims brought against any member of the Olin Group under Olin's retiree medical benefit plans by any Arch Employee or Subsequent Arch Employee who retires after the Distribution Date. If an Arch Employee is transferred to Olin or any of its Affiliates by the Arch Group on or prior to January 31, 2000, Olin shall be responsible for such individual's retiree medical benefits. (e) Implementation. Olin agrees to provide Arch or its designated --------------- representative with such information (in the possession of a member of the Olin Group and not already in the possession of a member of the Arch Group) as may be reasonably requested by Arch in order to carry out the requirements of this Section 2.4. Section 2.5. Options. (a) Arch Long Term Incentive Plan. Arch -------- ------------------------------ shall take all actions necessary or appropriate to establish on or before the Distribution Date the Arch Chemicals, Inc. 1999 Long Term Incentive Plan which shall contain terms that are substantially similar to the terms provided under the Olin 1991 Long Term Incentive Plan. (b) Olin Options. Olin and Arch shall take all actions necessary or ------------- appropriate so that each Olin Option is adjusted and/or replaced as set forth below. (1) Certain Employees and Former Employees of the Olin Group. This --------------------------------------------------------- Section 2.5(b)(1) sets forth the treatment in the Distribution of each Olin Option that is, as of the Distribution Date, outstanding and held by an Olin Employee employed by (or Olin Former Employee formerly employed by) a member of the Olin Group other than Olin, or a Beneficiary of any such Employee. Each such Olin Option ("Pre-Adjustment Option") shall be adjusted to constitute an Olin option (a "New Olin Option") and an Arch SAR. With respect to each New Olin Option (i) the number of shares of Olin Common Stock subject to such New Olin Option shall equal the number of shares of Olin Common Stock subject to the Pre-Adjustment Option, and (ii) the per-share exercise price of such New Olin Option shall equal the per-share exercise price of such Pre-Adjustment Option, as applicable, multiplied by the Olin Ratio (rounded down to the nearest whole cent). With respect to each such Arch SAR (i) the number of shares of Arch Common Stock subject to such Arch SAR shall equal the number of shares of Olin Common Stock subject to the Pre-Adjustment Option multiplied by the Distribution Ratio (rounded up to the nearest whole share), 17 and (ii) the per-share base amount of such Arch SAR shall equal the per-share exercise price of such Pre-Adjustment Option multiplied by the Arch Ratio (and then rounded down to the nearest whole cent). (2) Other Olin Participants and Arch Participants. This Section ---------------------------------------------- 2.5(b)(2) sets forth the treatment in the Distribution of each Olin Option that is, as of the Distribution Date, outstanding and held by an Olin Participant (other than one described in Section 2.5(b)(1)), or by an Arch Participant. As of the Distribution Date, each such outstanding Olin Option shall be adjusted to constitute two options (one a "New Olin Option" and the other an "Arch Option") as provided in this Section 2.5(b)(2). With respect to each such New Olin Option, (i) the number of shares of Olin Common Stock subject to such New Olin Option, shall equal the number of shares of Olin Common Stock subject to the Pre-Adjustment Option, and (ii) the per-share exercise price of such New Olin Option shall equal the per-share exercise price of such Pre-Adjustment Option, as applicable, multiplied by the Olin Ratio (rounded down to the nearest whole cent). With respect to each such Arch Option (i) the number of shares of Arch Common Stock subject to such Arch Option shall equal the number of shares of Olin Common Stock subject to the Pre-Adjustment Option multiplied by the Distribution Ratio (rounded up to the nearest whole share), and (ii) the per- share exercise price of such Arch Option shall equal the per-share exercise price of such Pre-Adjustment Option multiplied by the Arch Ratio (rounded down to the nearest whole cent). (c) Terms of Options and Arch SARs. The terms and conditions of each ------------------------------- New Olin Option, Arch Option and/or Arch SAR adjusted pursuant to this Section 2.5 shall be the same as those of the Olin Option it replaces, except as otherwise specifically provided in this Section 2.5 and except that (1) in the case of such options issued under the Olin 1980 Stock Option Plan to individuals who become Arch Employees, such options shall expire no later than on the earlier of (i) the end of their original term or (ii) the second anniversary of the Distribution Date, or (2) in the case of such options issued under the Olin 1988 Stock Option Plan or the Olin 1996 Stock Option Plan to individuals who become Arch Employees, such options shall expire no later than at the end of their original term. With respect to individuals who become Arch Employees, references to employment with or termination of employment with the Olin Group shall be changed to references to employment with or termination of employment with the Arch Group, and (ii) 18 other references to the Olin Group shall be changed to references to the Arch Group as appropriate. (d) Delivery of Shares and Cash. Effective as of the Distribution ---------------------------- Date, New Olin Options and Arch Options held by Arch Employees shall be transferred to the Arch Chemicals, Inc. 1999 Long Term Incentive Plan. New Olin Options, Arch Options and Arch SARs held by Olin Employees, Olin Former Employees, Subsequent Arch Employees and Arch Former Employees shall be retained by the Olin Incentive Plans. Olin shall be solely responsible for the delivery of Olin Common Stock upon exercise of New Olin Options in exchange for payment of the exercise price and Arch shall be solely responsible for the delivery of Arch Common Stock upon exercise of Arch Options, in each case in exchange for payment of the applicable exercise price. Olin shall assume and be solely responsible for all Liabilities with respect to Arch SARs which shall be issued under the Olin Incentive Plans. Any adjustment to or cash-out of New Olin Options made by Olin in accordance with the Olin Incentive Plans shall apply to all outstanding New Olin Options including those transferred to an Arch Plan and Olin shall be liable for such adjustment or cash-out. Similarly, any adjustment to or cash-out of Arch Options made by Arch in accordance with the Arch Chemicals, Inc. 1999 Long Term Incentive Plan shall apply to all outstanding Arch Options resulting from the Distribution, including those held under Incentive Plans, and Arch shall be liable for such adjustment or cash-out. (e) Olin and Arch shall each maintain a registration statement on Form S-8 to cover all of their respective outstanding options, regardless of who holds such options. Notwithstanding the foregoing provisions of this Section 2.5, if either Olin or Arch determines that because of legal, accounting, tax, and/or regulatory rules or requirements applicable to options, or restricted stock in any jurisdiction outside the United States, compliance with any of its obligations under this Section 2.5 with respect to options, or restricted stock held by or to be issued to any individual employed outside the United States would be impossible, illegal, impracticable or unreasonably expensive, it shall so notify the other party, and Arch and Olin shall use their best efforts to agree to appropriate alternative arrangements. Section 2.6. Executive and Director Compensation Plans. (a) 1998 ----------------------------------------- ---- Incentive Awards. Arch Employees and Former Arch Employees who were - ----------------- participating in the EVA Management Incentive Compensation Plan will be entitled to 19 receive an annual incentive bonus award with respect to 1998 performance assuming plan provisions are satisfied. (b) Other Equity Awards. Olin shall continue to sponsor the Olin -------------------- 1991 Long-Term Incentive Plan for the benefit of Olin Participants and Former Arch Employees. Immediately prior to the Distribution Date, holders of Olin Restricted Stock Units (whether an Olin Participant or an Arch Participant) shall be credited with one Arch Restricted Stock Unit for every two Olin Restricted Stock Units credited to them under an Olin Plan. Such Arch Restricted Stock Units shall be subject to substantially the same restrictions as the Olin Restricted Stock Units except that with respect to Arch Employees, any requirement for continued employment with the Olin Group shall be deemed to refer to continued employment with the Arch Group. All liability for Olin Restricted Stock Units and Arch Restricted Stock Units held by Arch Employees shall be transferred to the Arch Chemicals, Inc. 1999 Long Term Incentive Plan immediately prior to the Distribution Date and all reserves related to such units attributable to Arch Employees who are determined to be Arch Employees on the Distribution Date shall be transferred to Arch. Olin shall take all actions necessary or appropriate to provide that each individual who is expected to become an Arch Employee who has "Olin Performance Unit Plan" retention units shall have the payment of such units accelerated and paid out prior to the Distribution Date in Olin Common Stock. (c) Deferred Compensation Plan. Olin will continue to sponsor the --------------------------- Olin Corporation Employee Deferral Plan ("Olin Deferral Plan") for the benefit of Olin Participants and Arch Former Employees. Arch shall take all actions necessary or appropriate to establish before the Distribution Date, a Deferred Compensation Plan which shall contain terms that are substantially similar to the terms contained in the Olin Deferral Plan. Immediately prior to the Distribution Date, participants in the Olin Deferral Plan (whether Olin Participants or Arch Participants) who have an account invested in phantom shares of Olin Common Stock shall be credited with one phantom share of Arch Common Stock for every two phantom shares of Olin Common Stock credited to their accounts. All liability for phantom shares of Arch Common Stock and Olin Common Stock credited to Arch Employees and all related reserves attributable to Arch Employees who are determined to be Arch Employees on the Distribution Date shall be transferred to Arch immediately prior to the Distribution Date. (d) Benefits for Non-Employee Directors. Arch shall take all actions ------------------------------------ necessary or appropriate to establish 20 on or before the Distribution Date, a stock plan for non-employee directors which shall contain terms that are similar to the terms contained in the Olin Corporation 1997 Stock Plan for Non-Employee Directors; provided, however, that -------- ------- in lieu of or in addition to the annual grants of shares of Arch Common Stock to non-employee directors, the board of directors of Arch may elect to grant options to purchase shares of Arch Common Stock and/or performance shares. Phantom shares of Olin Common Stock and Arch Common Stock (after an adjustment which is similar to the Distribution) credited to Arch directors will be transferred to the Arch stock Plan for non-employee directors. (e) Dividend Equivalents. Dividend equivalent units on Olin --------------------- Restricted Stock Units and phantom shares of Olin Common Stock will be reinvested in Olin Restricted Stock Units and phantom shares of Olin Common Stock, respectively. Similarly, dividend equivalent units on Arch Restricted Stock Units and phantom shares of Common Stock will be reinvested in Arch Restricted Stock Units and phantom shares of Arch Common Stock, respectively. Effective as of the Distribution Date, (i) Arch shall assume and be solely responsible for all Liabilities (whether accrued, contingent or otherwise) with respect to dividend equivalent units on awards held by Arch Employees, and (ii) Olin shall assume or retain, as applicable, and be solely responsible for all Liabilities (whether accrued, contingent or otherwise) with respect to dividend equivalent units on awards held by Olin Participants or Former Arch Employees. ARTICLE III Foreign Plans ------------- Section 3.1. General Principles. This Section 3.1 sets forth certain ------------------- general principles relating to Foreign Plans; however, exceptions may be made to those general principles as set forth in Section 3.2. Olin and Arch shall take all actions necessary or appropriate so that, effective no later than the Distribution Date, all Foreign Plans have been divided and/or new Foreign Plans established (to the extent necessary) so that all benefits of Olin Participants under Foreign Plans (whether accrued or payable before, on or after the Distribution Date) are provided by Olin Foreign Plans, and all benefits of Arch Participants under Foreign Plans (whether accrued or payable before, on or after the Distribution Date) are provided by Arch Foreign Plans. If any Foreign Plan that is separated into an Olin Foreign Plan and an Arch Foreign Plan in 21 connection with or in anticipation of the Distribution is funded through a trust, insurance contract or other funding vehicle, then such funding vehicle shall be divided between such Olin Foreign Plan and Arch Foreign Plan on an equitable basis. From and after the Distribution Date: (i) the members of the Olin Group and the Olin Foreign Plans shall assume or retain, as applicable, and shall be solely responsible for, all Liabilities of the Pre-Distribution Group arising out of or relating to the Olin Foreign Plans; and (ii) the members of the Arch Group and the Arch Foreign Plans shall assume or retain, as applicable, and shall be solely responsible for, all Liabilities arising out of or relating to the Arch Foreign Plans. Section 3.2. Exceptions to General Principles. Olin and Arch --------------------------------- recognize that it is possible that, in certain cases, applicable law may prohibit the implementation of the general principles set forth in Section 3.1, or that there may be special circumstances making such implementation inadvisable or impractical. In all such cases, such general principles shall not be implemented and Olin and Arch shall use best efforts to develop and implement an alternative approach, and shall enter into such additional agreements as may be necessary or appropriate in connection therewith. ARTICLE IV General Provisions ------------------ Section 4.1. Employment Transfers; Severance Pay. (a) Arch and Olin ------------------------------------ shall take all steps necessary and appropriate so that, on or immediately after the Distribution Date, all individuals who have been designated to be Arch Employees are employed by a member of the Arch Group, and all individuals who have been designated to be Olin Employees are employed by a member of the Olin Group. (b) Arch and Olin agree that, except as specifically provided by law or otherwise in this Agreement, individuals who, in connection with the Distribution, cease to be Olin Employees and become Arch Employees shall not be deemed to have experienced a termination or severance of employment from Olin and its subsidiaries for purposes of any Olin Plan that provides for the payment of severance, redundancy, salary continuation or similar benefits. Section 4.2. Recognition of Olin Employment Service, Etc. The Arch -------------------------------------------- Plans shall, to the extent permitted by applicable law, recognize service before the Distribution with the Pre-Distribution Group as service with the Arch 22 Group. Each Arch Welfare Plan shall, to the extent permitted by applicable law, provide benefits to Arch Employees without interruption or change solely as a result of the transition from the corresponding Olin Welfare Plans, and, without limiting the generality of the foregoing: (a) shall, to the extent applicable, recognize all amounts applied to deductibles, out-of-pocket maximums and lifetime maximum benefits with respect to Arch Employees under the corresponding Olin Welfare Plan for the plan year that includes the Distribution Date and for prior periods (if applicable); (b) shall, to the extent applicable, not impose any limitations on coverage of preexisting conditions of Arch Employees except to the extent such limitations applied to such Arch Employees under the corresponding Olin Welfare Plan immediately before such Arch Welfare Plan became effective; and (c) shall not impose any other conditions (such as proof of good health, evidence of insurability or a requirement of a physical examination) upon the participation by Arch Employees who were participating in the corresponding Olin Welfare Plan immediately before such Arch Welfare Plan became effective. Section 4.3. Workers' Compensation. Arch shall be responsible for ---------------------- all workers' compensation claims payable to or on behalf of Arch Participants and Subsequent Arch Employees whether arising before, on or after the Distribution Date; provided, however, that with respect to such individuals -------- ------- receiving or entitled to receive workers' compensation benefits on the Distribution Date, Olin shall pay or cause to be paid such benefits on and after the Distribution Date and shall be reimbursed for such payments by Arch to the extent not covered by Olin's insurance. Accruals for such Liabilities shall be transferred to Arch. ARTICLE V Miscellaneous ------------- Section 5.1. Guarantee of Subsidiaries' Obligations. Each of the --------------------------------------- parties hereto shall cause to be performed, and hereby guarantees the performance and payment of, all actions, agreements, obligations and Liabilities set forth herein to be performed or paid by any Subsidiary of such party which is contemplated by the Distribution Agreement to be a Subsidiary of such party on or after the Distribution Date. Section 5.2. Disputes. (a) In any case in which Arch or Olin shall --------- disagree with the determination of an amount which this Agreement requires to be made by the 23 Enrolled Actuary, each such disagreeing party shall have the right, within 30 days after receipt of notice of such determination, to engage, at its own expense, an independent expert to make the determination of such amount. If the amount determined by such independent experts should differ, such amount shall be reasonably and equitably determined by another independent expert selected by agreement between or among the Enrolled Actuary and such independent experts. (b) Any other dispute, controversy or claim arising out of or relating to this Agreement shall be governed by Article V of the Distribution Agreement. Section 5.3. Sharing of Information. Each of Olin and Arch shall, ----------------------- and shall cause each of the other members of their respective Groups to, provide to the other all such information in its possession as the other may reasonably request to enable it to administer its employee benefit plans and programs, and to determine the scope of, and fulfill, its obligations under this Agreement. Such information shall, to the extent reasonably practicable, be provided in the format and at the times and places requested, but in no event shall the party providing such information be obligated to incur any direct expense not reimbursed by the party making such request, nor to make such information available outside its normal business hours and premises except as the parties otherwise specifically agree. The right of the parties to receive information hereunder shall, without limiting the generality of the foregoing, extend to any and all reports, and the data underlying such reports, prepared by the Enrolled Actuary in making any determination under this Agreement or by any third party engaged pursuant to Section 5.2. Section 5.4. Termination. This Agreement shall be terminated in the ------------ event that the Distribution Agreement is terminated and the Distribution abandoned prior to the Distribution Date. In the event of such termination, neither party shall have any liability of any kind to the other party. Section 5.5. Rights To Amend or Terminate Plans; No Third Party -------------------------------------------------- Beneficiaries. Except as provided in Section 2.4(d), no provision of this - -------------- Agreement shall be construed (a) to limit the right of Olin, any other member of the Olin Group, Arch or any other member of the Arch Group to amend any Plan or terminate any Plan, or (b) to create any right or entitlement whatsoever in any Employee, former Employee or Beneficiary, including a right to continued employment or to any benefit under a Plan or any other compensation. This Agreement is solely for the 24 benefit of the parties hereto and their respective subsidiaries and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. Section 5.6. Complete Agreement. This Agreement and the agreements ------------------- and other documents referred to herein shall constitute the entire agreement between the parties hereto with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. Section 5.7. Governing Law. Subject to applicable U.S. federal law, -------------- this Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia applicable to contracts executed therein and to be performed therein as to all matters, including matters of validity, construction, effect, performance and remedies. Section 5.8. Notices. All notices, requests, claims, demands and -------- other communications hereunder shall be given in accordance with the provisions of Section 8.08 of the Distribution Agreement. Section 5.9. Amendment and Modification. This Agreement may be --------------------------- amended, modified or supplemented only by a written agreement signed by both of the parties hereto. Section 5.10. Successors and Assigns. This Agreement and all of the ----------------------- provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns, but neither this Agreement nor any of the rights, interests and obligations hereunder shall be assigned by any party hereto without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed). SECTION 5.11. Consent to Jurisdiction. Without limiting the ------------------------ provisions of Article V of the Distribution Agreement, each of the parties irrevocably submits to the exclusive personal jurisdiction and venue of (a) the Circuit Court of Henrico County, Commonwealth of Virginia, and (b) the United States District Court for the Eastern District of Virginia 25 (Richmond Division), for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the Eastern District of Virginia (Richmond Division) or if such suit, action or other proceeding may not be brought in such court for juris dictional reasons, in the Circuit Court of the Henrico County, Commonwealth of Virginia. Each of the parties further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth in the Distribution Agreement shall be effective service of process for any action, suit or proceeding in Virginia with respect to any matters to which it has submitted to jurisdiction in this Section 5.11. Each of the parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Circuit Court of Henrico County, Commonwealth of Virginia, or (ii) the United States District Court for the Eastern District of Virginia (Richmond Division), and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum, and the right to object, with respect to such action, suit or proceeding, that such court does not have jurisdiction over such Party. Section 5.12. Counterparts. This Agreement may be executed in two or ------------- more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 5.13. Interpretation. The Article and Section headings --------------- contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties hereto and shall not in any way affect the meaning or interpretation of this Agreement. Section 5.14. Legal Enforceability. Any provision of this Agreement --------------------- which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Each party acknowledges that money damages would be an inadequate remedy for any breach of the provisions of this Agreement and agrees that the obligations of the parties hereunder shall be specifically enforceable. Section 5.15. References; Construction. References to any "Article" ------------------------- or "Section" without more, are to Articles or Sections to or of this Agreement. Unless 26 otherwise expressly stated, "including", "includes" or "include" shall be deemed followed by the words "without limitation". IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. OLIN CORPORATION, by _____________________________ Name: Title: ARCH CHEMICALS, INC., by _____________________________ Name: Title: EX-10.7 12 FORM OF EXECUTIVE AGREEMENT EXHIBIT 10.7 EXECUTIVE AGREEMENT ------------------- Agreement between Arch Chemicals, Inc., a Virginia corporation ("Arch Chemicals"), and _______ (the "Executive"), dated as of __________, ____. Arch Chemicals and the Executive agree as follows: 1. Definitions As used in this Agreement: (a) "Cause" means the willful and continued failure of the Executive to substantially perform his or her duties; the willful engaging by the Executive in gross misconduct significantly and demonstrably financially injurious to Arch Chemicals; or willful misconduct by the Executive in the course of his or her employment which is a felony or fraud. No act or failure to act on the part of the Executive will be considered "willful" unless done or omitted not in good faith and without reasonable belief that the action or omission was in the interests of Arch Chemicals or not opposed to the interests of Arch Chemicals. (b) "Change in Control" means: (i) Arch Chemicals ceases to be, directly or indirectly, owned of record by at least 1,000 stockholders; (ii) A person, partnership, joint venture, corporation or other entity, or two or more of any of the foregoing acting as a "person" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Act"), other than Arch Chemicals, a majority-owned subsidiary of Arch Chemicals or an employee benefit plan (or the plan's related trust) of Arch Chemicals or such subsidiary, become(s) the "beneficial owner" (as defined in Rule 13d-3 under such Act) of 20% or more of the then outstanding voting stock of Arch Chemicals; (iii) During any period of two consecutive years, individuals who at the beginning of such period constitute Arch Chemicals' Board of Directors (together with any new Director whose election by Arch Chemicals' Board of Directors or whose nomination for election by Arch Chemicals' stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office; (iv) All or substantially all of the business of Arch Chemicals is disposed of pursuant to a merger, consolidation or other transaction in which Arch Chemicals is not the surviving corporation or Arch Chemicals combines with another company and is the surviving corporation (unless the shareholders of Arch Chemicals immediately following 2 such merger, consolidation, combination, or other transaction beneficially own, directly or indirectly, more than 50% of the aggregate voting stock or other ownership interests of (x) the entity or entities, if any, that succeed to the business of Arch Chemicals or (y) the combined company) or (v) Approval by Arch Chemicals' shareholders of (i) a sale of all or substantially all the assets of Arch Chemicals or (ii) a liquidation or dissolution of Arch Chemicals. (c) "Disability" means that the Executive has suffered an incapacity due to physical or mental illness which meets the criteria for disability established at the time under Arch Chemicals' short-term disability plan. (d) "Executive Severance" means: (i) twelve months of the Executive's then current monthly salary (without taking into account any reductions which may have occurred at or after the date of a Change in Control); plus (ii) an amount equal to the greater of (A) the Executive's average annual award actually paid under Arch Chemicals' short-term annual incentive compensation plans or programs ("ICP") (including zero if nothing was paid or deferred but including any portion thereof the Executive has elected to defer) for the three completed fiscal years immediately preceding the date of Termination (or if the Executive has not participated in ICP for such three completed fiscal years, the average of any such awards for the shorter period of years in which the Executive was a participant) and (B) the Executive's then current ICP standard annual award. (e) "Potential Change in Control" means: (i) Arch Chemicals has entered into an agreement the consummation of which would result in a Change in Control; (ii) any person (including Arch Chemicals) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; (iii) Arch Chemicals learns that any person (other than an employee benefit plan of Arch Chemicals or a subsidiary of Arch Chemicals (or the plan's related trust)) has become the beneficial owner directly or indirectly of securities of Arch Chemicals representing 9.5% or more of the combined voting power of Arch Chemicals' then outstanding securities ordinarily entitled to vote in elections of directors; or (iv) the Board of Directors of Arch Chemicals adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of Arch Chemicals has occurred; 3 provided, if an event specified in clause (iii) above has occurred by or on the date hereof, such event shall not be deemed a Potential Change in Control unless such person acquires another 1% of such securities subsequent to the date hereof. (f) "Termination" means: (i) The Executive is discharged by Arch Chemicals other than for Cause; (ii) The Executive terminates his or her employment in the event that: (1) Arch Chemicals requires the Executive to relocate the Executive's then office to an area which is not within reasonable commuting distance, on a daily basis, from the Executive's then residence, except that prior to a Change in Control a requirement to relocate the Executive's office to Arch Chemicals' corporate headquarters is not a basis for Termination; (2) Arch Chemicals reduces the Executive's base salary or fails to increase the Executive's base salary on a basis consistent (as to frequency and amount) with Arch Chemicals' exempt salary system as then in effect or, in the event of a Change in Control, as in effect immediately prior to the Change in Control; (3) Arch Chemicals fails to continue the Executive's participation in its benefit plans (including incentive compensation and stock options) on substantially the same basis, both in terms of the amount of the benefits provided (other than due to Arch Chemicals' or a relevant operation's financial or stock price performance provided such performance is a relevant criterion under such plan) and the level of the Executive's participation relative to other participants as exists on the date hereof; provided that, with respect to annual and long term incentive compensation plans, the basis with which the amount of benefits and level of participation of the Executive shall be compared shall be the average benefit awarded to the Executive under the relevant plan during the three completed fiscal years immediately preceding the date of Termination; (4) The Executive suffers a Disability which prevents the Executive from performing the Executive's duties with Arch Chemicals for a period of at least 180 consecutive days; (5) Following a Change in Control, Arch Chemicals fails to substantially maintain its benefit plans as in effect at the time of the Change in Control, unless reasonably equivalent arrangements (embodied in an on-going substitute or alternative plan) have been made with respect to such plans; or (6) The Executive's duties, position or reporting responsibilities are diminished. 4 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 the Executive Agreement dated as of ________, 199_ between Arch Chemicals and the Executive.(1) 3. Term/Executive's Duties. (a) This Agreement expires at the close of business on September 30, 2002, unless prior to that date there is a Potential Change in Control or a Change in Control, in which case this Agreement will expire on the later of (i) the close of business on September 30, 2002, (ii) three years following the date of the Potential Change in Control or (iii) three years following the date of the Change in Control; provided that the expiration of this Agreement will not affect any of the Executive's rights resulting from a Termination prior to such expiration. In the event of the Executive's death while employed by Arch Chemicals, this Agreement shall terminate and be of no further force or effect on the date of his or her death; provided that the Executive's death will not affect any of the Executive's rights resulting from a Termination prior to death. (b) During the period of the Executive's employment by Arch Chemicals, the Executive shall devote his or her full time efforts during normal business hours to Arch Chemicals' business and affairs, except during reasonable vacation periods and periods of illness or incapacity. Nothing in this Agreement will preclude the Executive from devoting reasonable periods required for service as a director or a member of any organization involving no conflict of interest with Arch Chemicals' interest; provided that no additional position as director or member shall be accepted by the Executive during the period of his or her employment with Arch Chemicals without its prior consent. (c) The Executive agrees that in the event of any Potential Change in Control of Arch Chemicals occurring from time to time after the date hereof, the Executive - ------------------ (1) If Executive had a Tier II, use the following language instead: The Agreement supersedes and replaces the Letter Agreement (Tier II), dated __________, 19__, between Arch Chemicals and the Executive." If Executive is a new hire, use the following: "This paragraph intentionally left blank." 5 will remain in the employ of Arch Chemicals until the earlier of (i) the end of the six month period following the occurrence of such Potential Change in Control and (ii) a Change in Control during which time the Executive will have an office, title, duties and responsibilities substantially consistent with those applicable immediately prior to such Potential Change in Control. 6 4. Executive Severance Payment (a) In the event of a Termination occurring before the expiration of this Agreement, Arch Chemicals will pay the Executive a lump sum in an amount equal to the Executive Severance. The payment will be made within 10 days of the Termination. (b) In the event of a Termination after a Change in Control has occurred, in addition to the Executive Severance paid under paragraph 4(a) above, Arch Chemicals will pay a Change in Control severance premium to the Executive in an amount equal to two times the Executive Severance. The Change in Control severance premium, if it becomes due, will be made within 10 days of the Termination. (c) The amount due under paragraph 4(a) and 4(b), if any, will be reduced to the extent that, if such amount in the aggregate were paid in equal monthly installments over a 12-month period (or in the event both paragraph 4(a) and 4(b) are applicable, a 36-month period), no installment would be paid after the Executive's sixty-fifth birthday. (d) The Executive will not be required to mitigate the amount of any payment provided for in paragraph 4(a) or 4(b) by seeking other employment or otherwise, nor shall any compensation received by the Executive from a third party reduce such payment except as explicitly provided in this Agreement. Except as may otherwise be expressly provided herein, nothing in this Agreement will be deemed to reduce or limit the rights which the Executive may have under any employee benefit plan, policy or arrangement of Arch Chemicals. Except as expressly provided in this Agreement, payments made under paragraphs 4 or 5(e) shall not be affected by any set-off, counterclaim, recoupment, defense or other claim which Arch Chemicals may have against the Executive. (e) If the Executive receives the Executive Severance, the Executive will not be entitled to receive any other severance otherwise payable to the Executive under any other severance plan of Arch Chemicals. If on the Termination date the Executive is eligible and is receiving payments under any then existing Arch Chemicals disability plan, then the Executive agrees that all such payments may, and will be, suspended and offset for 12 months (or in the event paragraph 4(b) is also applicable, 36 months) (subject to applicable law) following the Termination date. If after such period the Executive remains eligible to receive disability payments, then such payments shall resume in the amounts and in accordance with the provisions of the applicable Arch Chemicals disability plan. (f) In the event the Executive, in connection with the sale of an Arch Chemicals business to a third party or the transfer of an Arch Chemicals business or Arch Chemicals assets to a joint venture which would be owned directly or indirectly by Arch Chemicals with one or more third parties, ceases to be employed by Arch Chemicals and with Arch Chemicals' consent becomes employed by the buyer or its affiliates or the joint venture or its affiliates, the Executive shall be entitled to the benefits provided under paragraph 4(a) (using Arch Chemicals figures at the time of new employment) (subject to paragraphs 4(c), 4(d) and 4(e)) and the first sentence of paragraph 5(a) (subject to paragraph 5(c)), and paragraph 5(d), if the Executive has a Termination as defined in paragraph 1(f) with his or 7 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 the Executive ceases to be employed by Arch Chemicals. 5. Other Benefits (a) If the Executive becomes entitled to payment under paragraph 4(a), the Executive will receive 12 months service credit under all Arch Chemicals Pension Plans for which the Executive was eligible at the time of the Termination (i.e., under Arch Chemicals' qualified Pension Plans to the extent permitted under then applicable law, otherwise such credit will be reflected in a supplementary pension payment from Arch Chemicals to be due at the times and in the manner payments are due the Executive under such qualified pension plans), and for 12 months from the date of the Termination the Executive (including covered dependents) will continue to enjoy coverage on the same basis as a similarly situated active employee under all Arch Chemicals medical, dental, and life insurance plans to the extent the Executive was enjoying such coverage immediately prior to the Termination. The Executive's entitlement to insurance coverage under the Consolidated Omnibus Budget Reconciliation Act would commence at the end of the period during which insurance coverage is provided under this Agreement without offset for coverage provided hereunder. The Executive shall accrue no vacation during the 12 months following the date of Termination but shall be entitled to payment for accrued and unused vacation for the calendar year in which the Termination occurs. If the Executive receives the Executive Severance (including the amount referred to in paragraph 1(d)(ii)), the Executive shall not be entitled to an ICP award for the calendar year of Termination if Termination occurs during the first calendar quarter. Even if the Executive receives the Executive Severance (including the amount referred to in paragraph 1(d)(ii)) and if Termination occurs during or after the second calendar quarter, the Executive shall be entitled to a prorated ICP award for the calendar year of Termination which shall be determined by multiplying his or her then current ICP standard by a fraction the numerator of which is the number of weeks in the calendar year prior to the Termination and the denominator of which is 52. The Executive shall accrue no ICP award following the date of Termination. The accrued vacation pay and ICP award, if any, shall be paid in a lump sum when the Executive Severance is paid. (b) If the Executive becomes entitled to payment under paragraph 4(b), the pension credit and insurance coverage provided for in paragraph 5(a) will be for an additional 24-month period beyond the period provided in paragraph 5(a). (c) Notwithstanding the foregoing paragraphs 5(a) and 5(b), no such service credit or insurance coverage will be afforded by this Agreement with respect to any period after the Executive's sixty-fifth birthday. 8 (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. (e) Notwithstanding the provisions of Section 10 of the Arch Chemicals Senior Executive Pension Plan (the "Senior Plan"), if the Executive is in active employment with Arch Chemicals at the date of a Change in Control but has not attained age 55 at such date, the Executive shall (if then a Participant in the Senior Plan) nevertheless automatically be paid the lump-sum amount called for by such Section 10, except that such lump-sum amount will be calculated first, by calculating the sum equal to the annual benefit which would otherwise be payable to the Executive at age 65 under all Arch Chemicals pension plans assuming the Executive had terminated his or her employment with Arch Chemicals on the date of the Change in Control, second, by multiplying such sum by 72%, which is the current percentage applicable in the calculation of benefits paid to employees retiring from active service with Arch Chemicals at age 55 under the early retirement provisions of the Arch Chemicals Employees Pension Plan, third, by determining the then lump-sum actuarial value of the product resulting from the second step, and fourth, by deducting from such lump-sum actuarial value the then lump-sum actuarial value of the Executive's accrued annual benefits under all other Arch Chemicals pension plans. The actuarial value shall be determined as the amount needed to purchase a fixed annuity through Metropolitan Life Insurance Company ("Metropolitan") or its successor immediately prior to the Change in Control. In the event such annuity is not available through Metropolitan, then Prudential Insurance Company or an insurance company with comparable rating by A.M. Best & Company shall be substituted for Metropolitan. A lump-sum payment under this paragraph 5(e) will be used to reduce any payments under the Senior Plan which may become due to the Executive thereafter. The purpose of this paragraph 5(e) is to ensure that an Executive who is less than age 55 at the time of the Change in Control receives a lump-sum payment which when combined with the value of the Executive's pension benefits from all other Arch Chemicals pension plans preserves the 72% age 55, subsidized early retirement factor, rather than the actuarial reduction. Such lump-sum payment shall be discounted by the same interest rate used by the insurance company to determine the actuarial value to provide for the deferral of the benefit until the Executive reaches age 55. (f) If the Executive becomes entitled to the payment under paragraph 4(b), at the end of the period for insurance coverage provided in accordance with paragraph 5(b), the Executive shall be entitled to continue in Arch Chemicals' medical and dental coverage (including dependent coverage) on terms and conditions no less favorable to the Executive as in effect prior to the Change in Control for the Executive until the Executive reaches age 65; provided that if the Executive obtains other employment which offers medical or dental coverage to the Executive and his or her dependents, the Executive shall enroll in such medical or dental coverage, as the case may be, and the corresponding coverage provided to the Executive hereunder shall be secondary coverage to the coverage provided by the 9 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 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, 10 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 defined in the preamble to this Agreement and any successor to its business or assets which executes and delivers the agreement provided for in this paragraph 7 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law or otherwise. (b) This Agreement shall be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 8. Notices. For the purpose of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: ------------ ------------ ------------ If to the Company: Arch Chemicals, Inc. 501 Merritt 7 P.O. Box 4500 Norwalk, CT 06856-4500 Attention: Corporate Secretary or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 9. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Virginia (without giving effect to its conflicts of law). 10. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in writing signed by the Executive and Arch Chemicals. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the 11 subject matter hereof have been made by either party which are not set forth expressly in this Agreement. 11. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same Agreement. 12. Withholding of Taxes. Arch Chemicals may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling. 13. Non-assignability. This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder, except as provided in paragraph 7 above. Without limiting the foregoing, the Executive's right to receive payments hereunder shall not be assignable or transferable, whether by pledge, creation of a security interest or otherwise, other than a transfer by his or her will or by the laws of descent or distribution, and, in the event of any attempted assignment or transfer by the Executive contrary to this paragraph, Arch Chemicals shall have no liability to pay any amount so attempted to be assigned or transferred. 14. No Employment Right. This Agreement shall not be deemed to confer on the Executive a right to continued employment with Arch Chemicals. 15. Disputes/Arbitration. (a) Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration at Arch Chemicals' corporate headquarters in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid during the pendency of any dispute or controversy arising under or in connection with this Agreement. (b) Arch Chemicals shall pay all reasonable legal fees and expenses, as they become due, which the Executive may incur to enforce this Agreement through arbitration or otherwise unless the arbitrator determines that Executive had no reasonable basis for his or her claim. Should Arch Chemicals dispute the entitlement of the Executive to such fees and expenses, the burden of proof shall be on Arch Chemicals to establish that the Executive had no reasonable basis for his or her claim. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of the day and year first above set forth. ARCH CHEMICALS, INC. 12 By: ------------------------------ Michael E. Campbell Chairman of the Board and Chief Executive Officer - ------------------------- EX-10.8 13 TAX SHARING AGREEMENT 1 EXHIBIT 10.8 TAX SHARING AGREEMENT dated as of [ ], 1999, between OLIN CORPORATION, a Virginia corporation ("Olin"), and ARCH CHEMICALS, INC., a Virginia corporation ("Arch"). Olin and Arch are hereinafter referred to as the "Companies." WHEREAS, as of the date hereof, Olin is the common parent of an affiliated group of domestic corporations, including Arch and its direct and indirect subsidiaries, which has elected to file consolidated Federal income tax returns; WHEREAS, the Board of Directors of Olin has determined to distribute all the outstanding shares of common stock of Arch to the Olin shareholders of record on ____, 199__ (the "Distribution") and, as a result of the Distribution, Arch and its subsidiaries will not be included in the consolidated Federal income tax return of Olin for the portion of the taxable year following the Distribution or in future years; WHEREAS, the Companies have entered into an agreement, dated as of ______, 1999 (the "Distribution Agreement"), to, among other things, allocate and assign responsibility for certain liabilities of the Companies in connection with and after the Distribution; and WHEREAS, the Companies intend that the Distribution qualify as a tax- free spin-off under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, the Companies desire to allocate the tax responsibilities, liabilities and benefits of transactions which occurred on or prior to the date on which the Distribution occurs (the "Distribution Date"), and transactions which may occur after the Distribution Date, and to provide for certain other tax matters; NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the Companies (each on behalf of itself, each of its subsidiaries as of the Distribution Date, and its future subsidiaries) hereby agree as follows: 2 ARTICLE I Definitions ----------- This Agreement is the "Tax Sharing Agreement" referred to in Section ___ of the Distribution Agreement. Terms defined in the Distribution Agreement but not defined herein shall have the meanings set forth in the Distribution Agreement, and the following terms shall have the following meanings herein (such meanings to be equally applicable to both the singular and the plural forms of the terms defined): "Affiliated Group" means an affiliated group of corporations within ---------------- the meaning of Code Section 1504(a) for the taxable period in question. "Arch Affiliated Group" means, for each taxable period, the Affiliated --------------------- Group of which Arch or any successor of Arch is the common parent. "Arch Group" means, for each taxable period, (i) the corporations that ---------- are members of the Arch Affiliated Group, and (ii) the corporations that would be members of the Arch Affiliated Group but for the fact they are not includible corporations under Code Section 1504(b). "Code" is defined in the recitals to this Agreement. ---- "Distribution Agreement" is defined in the recitals to this Agreement. ---------------------- "Distribution Taxes" means Taxes of any member of the Olin Affiliated ------------------ Group (as in existence prior to the Distribution) resulting from, or arising in connection with, the failure of the Distribution to be tax-free to such member under Code Sections 355 and 368(a)(1)(D) (including without limitation by reason of the application of Code Sections 355(d) or (e)). "Final Determination" shall mean the final resolution of liability for ------------------- any Tax for any taxable period, by or as a result of: (i) a final and unappealable decision, judgment, decree or other order by any court of competent jurisdiction; (ii) a final settlement with the IRS, a closing agreement or accepted offer in compromise under Code Sections 7121 or 7122, or a comparable agreement under the laws of other jurisdictions, which resolves the entire Tax liability for any taxable period; (iii) any allowance of a 3 refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered by the jurisdiction imposing the Tax; or (iv) any other final disposition, including by reason of the expiration of the applicable statute of limitations. "Income Taxes" shall mean any federal, state, local or foreign Taxes ------------ determined by reference to income, net worth, gross receipts or capital, or any such Taxes imposed in lieu of income Taxes. "Indemnifying Party" is defined in Section 4.01(a) herein. ------------------ "Indemnity Issue" is defined in Section 4.01(a) herein. --------------- "IRS" means the United States Internal Revenue Service or any --- successor thereto, including, but not limited to its agents, representatives, and attorneys. "Olin Affiliated Group" means, for each taxable period, the Affiliated --------------------- Group of which Olin or any successor of Olin is the common parent. "Olin Group" means, for each taxable period, (i) the corporations that ---------- are members of the Olin Affiliated Group, and (ii) the corporations that would be members of the Olin Affiliated Group but for the fact they are not includible corporations under Code Section 1504(b). "Other Taxes" shall mean any federal, state, local or foreign Taxes ----------- other than Income Taxes. "Post-Distribution Period" means any period, and in the case of a ------------------------ Straddle Period the portion of any such period, beginning after the Distribution Date. "Pre-Distribution Period" means any period, and in the case of a ----------------------- Straddle Period the portion of any such period, ending on or before the Distribution Date. "Representations" shall mean the written representations made to --------------- Cravath, Swaine & Moore in connection with their tax opinion regarding certain tax consequences of the Distribution. "Straddle Period" means any period that begins on or before and ends --------------- after the Distribution Date. 4 "Taxes" means all forms of taxation imposed by a Taxing Authority, ----- including, but not limited to, net income, gross income, alternative minimum, sales, use, ad valorem, gross receipts, value added, franchise, license, transfer, withholding, payroll, employment, excise, severance, stamp, property, custom duty, taxes or governmental charges, together with any related interest, penalties or other additional amounts imposed by a Taxing Authority. "Taxing Authority" means any governmental authority imposing Taxes. ---------------- "Tax Return" means any return, filing, questionnaire, information ---------- statement or other document required to be filed, including amended returns that may be filed, for any period with any Taxing Authority, in connection with any Tax (whether or not a payment is required to be made with respect to such filing). ARTICLE II Preparation and Filing of Tax Returns ------------------------------------- SECTION 2.01. Pre-Distribution and Straddle Period Tax Returns. Olin ------------------------------------------------- shall prepare and file (i) all Tax Returns of the Olin Group or any member thereof that are required to be filed for any Pre-Distribution Period, (ii) any Tax Returns (other than property tax returns) of the Olin Group or any member thereof (other than members of the Arch Group who are not members of the Arch Affiliated Group) for any Straddle Period, and (iii) any property tax returns of any Olin Group member with respect to an assessment date on or prior to the Distribution Date. Arch hereby irrevocably designates, and agrees to cause each of its affiliates to designate, Olin as its agent to take any and all actions necessary or incidental to the preparation and filing by Olin of any Tax Return described in the preceding sentence of this Section 2.01. Arch shall prepare and file (i) all Tax Returns of members of the Arch Group that are not members of the Arch Affiliated Group for any Straddle Period, and (ii) any property tax returns of any Arch Group member with respect to an assessment date after the Distribution Date. SECTION 2.02. Post-Distribution Tax Returns. All Tax Returns for any ------------------------------ Post-Distribution Period (other than Straddle Periods) shall be prepared and filed by Olin if they relate to any member of the Olin Group (as in effect after the Distribution) and by Arch if they relate to any member of the Arch Group. SECTION 2.03. Manner of Tax Return Preparation. (a) Unless otherwise -------------------------------- required by a Taxing Authority or a Court, the Companies hereby agree to file all Tax Returns, and to take all other actions, in a manner consistent with the following positions: (i) the Distribution is a tax-free spin-off within the meaning of Code Sections 355 and 368(a) (1) (D), (ii) the last day on which any member of the Arch Affiliated Group was included in the Olin Affiliated Group is the Distribution Date, and (iii) the taxable year of each member of the Arch Affiliated Group ended on the Distribution Date. All Tax Returns shall be filed on a timely basis by the party responsible for filing such returns under this Agreement. (b) For each Straddle Period Tax Return that Olin is required to file under Section 2.01 that includes a member of the Arch Affiliated Group, Arch shall prepare and provide to Olin, a pro-forma Return for the portion of the Straddle Period beginning after the Distribution Date. With respect to sales or use tax Returns, Arch shall provide a pro-forma Return 7 business days prior to the due date of such tax return, and with respect to all other Straddle Period Tax Returns, Arch shall provide a pro-forma Return at least 30 days prior to the due date (including extensions) of such Return. (c) Within 90 days after filing the 1999 consolidated federal Income Tax Return for the Olin Affiliated Group, Olin shall notify Arch of the tax attributes associated with the Olin subsidiaries, and the tax bases of the assets and liabilities, transferred to Arch in connection with the Distribution. At Arch's request, Olin will use its best efforts to provide Arch with preliminary estimates of such information as soon as is practicable. 6 ARTICLE III Payment of Taxes ---------------- SECTION 3.01. Pre-Distribution Non-Straddle Period Taxes. Except as ------------------------------------------- otherwise provided in Sections 3.04 and 3.05 of this Agreement, Olin shall be liable for and shall pay all Taxes, and shall be entitled to receive all refunds of Taxes, for the Olin Group (as in effect prior to the Distribution) or any member thereof for all Pre-Distribution Periods other than Straddle Periods. SECTION 3.02. Straddle Period Taxes. (a) Pre-Distribution Straddle --------------------- ------------------------- Period Taxes. Except as otherwise provided in Sections 3.04, 3.05 and 3.06 of - ------------ this Agreement, Olin shall be liable for all Taxes, and shall be entitled to receive all refunds of Taxes, for the Olin Group (as in effect prior to the Distribution) or any member thereof for the portion of any Straddle Period ending on the Distribution Date. Olin shall pay all Taxes described in this Section 3.02(a), provided that Olin shall pay to Arch, rather than to the applicable Taxing Authorities, any such Taxes for members of the Arch Group for which Arch is required to file Straddle Period Tax Returns under Section 2.01. Arch shall remit to the applicable Taxing Authorities all Straddle Period Taxes it receives from Olin. (b) Post-Distribution Straddle Period Taxes. Except as otherwise --------------------------------------- provided in Sections 3.04, 3.05 and 3.06 of this Agreement, Arch shall be liable for Taxes, and shall be entitled to receive all refunds of Taxes, for the Arch Group or any member thereof for the portion of any Straddle Period after the Distribution Date. Arch shall pay all Taxes described in this Section 3.02(b), provided that Arch shall pay to Olin, rather than to the applicable Taxing Authorities, any such Taxes for members of the Arch Group for which Olin is required to file Straddle Period Tax Returns under Section 2.01. Olin shall remit to the applicable Taxing Authorities all Straddle Period Taxes it receives from Arch. (c) Straddle Period Income Taxes shall be apportioned between the Pre-Distribution Period and the Post-Distribution Period on a closing of the books basis, and Other Taxes will be apportioned between the Pre-Distribution Period and the Post-Distribution Period on a daily proration basis. SECTION 3.03. Other Post-Distribution Taxes. Except as otherwise ------------------------------ provided in Section 3.05 and 3.06 of 7 this Agreement, Arch and Olin shall each pay all Taxes, and shall be entitled to receive and retain all refunds of Taxes, that are owed by members of their respective Groups for periods beginning after the Distribution Date. SECTION 3.04. Distribution Taxes. ------------------- (a) Olin Group Liability for Certain Distribution Taxes. The ---------------------------------------------------- members of the Olin Group shall be liable for any Distribution Taxes that are primarily attributable to one or more of the following: (i) any inaccurate statement or representation of fact or intent (or omission to state a material fact) with respect to the Olin Group (excluding members of the Arch Group) in the Representations; (ii) any action or omission by the Olin Group after the date of the Distribution, including without limitation, a cessation, transfer to affiliates or disposition of its active trades or businesses, or an issuance of stock, stock buyback or payment of an extraordinary dividend by any member of the Olin Group following the Distribution; (iii) any acquisition of any stock or assets of any member of the Olin Group by one or more other persons prior to or following the Distribution; or (iv) any issuance of stock by Olin, or change in ownership of stock in Olin, that causes Code Sections 355(d) or 355(e) to apply to the Distribution. (b) Arch Group Liability for Certain Distribution Taxes. The ---------------------------------------------------- members of the Arch Group shall be liable for any Distribution Taxes that are primarily attributable to one or more of the following: (i) any inaccurate statement or representation of fact or intent (or omission to state a material fact) in the Representations that relates to the Arch Group; (ii) any action or omission by the Arch Group after the date of the Distribution, including without limitation, a cessation, transfer to affiliates or disposition of its active trades or businesses, or an issuance of stock, stock buyback or payment of an extraordinary dividend by any member of the Arch Group following the Distribution; 8 (iii) any acquisition of any stock or assets of any member of the Arch Group by one or more other persons following the Distribution; or (iv) any issuance of stock by Arch, or change in ownership of stock in Arch, that causes Code Sections 355(d) or 355(e) to apply to the Distribution. (c) Joint Liability for Remaining Distribution Taxes. The liability ------------------------------------------------- for any Distribution Taxes not allocated by Sections 3.04(a) or (b) shall be borne equally by the Olin Group and the Arch Group. (d) Applicability. The provisions of this Section 3.04 shall apply -------------- notwithstanding any other provisions of this Agreement. SECTION 3.05. (a) Gain Recognition Agreement Taxes. If a Taxing --------------------------------- Authority determines that any member of the Olin Group or Arch Group has failed to comply with the terms of any Code Section 367 "gain recognition agreement" executed by a member of the Olin Group during a Pre-Distribution Period, and such non-compliance is attributable to any action or omission by a member of the Arch Group or any other affiliate of Arch after the Distribution, the Arch Group shall be liable for any resulting Tax liability (such liability, a "GRA Tax Liability"). (b) Applicability. The provisions of this Section 3.05 shall apply -------------- notwithstanding any other provisions of this Agreement. SECTION 3.06. (a) Compensation Deductions. With respect to any non- ------------------------ qualified stock options relating to Olin or Arch stock, or stock appreciation rights relating to Arch stock, that are outstanding immediately after the Distribution (the "Options"), each of Olin and Arch shall be responsible for timely filing all required reports with any relevant Taxing Authorities with respect to grants or exercises of Options on its stock. Olin (or the appropriate member of the Olin Group) shall claim all Tax deductions arising by reason of exercises by Olin Group employees, and all employees who retired prior to the Distribution, of all Options. Arch (or the appropriate member of the Arch Group) shall claim all Tax deductions arising by reason of exercises of Options by Arch Group employees. (b) If, pursuant to a Final Determination, all or any part of a Tax deduction claimed by a member of the Olin or Arch Group pursuant to Section 3.06(a) is disallowed, the 9 appropriate member of the Arch or Olin Group, as the case may be, shall, to the extent such deduction may be allowable to such appropriate member, promptly claim such deduction. If such appropriate member realizes a Tax benefit (i.e., ---- a reduction in Taxes) in any period as a result of claiming a deduction pursuant to this Section 3.06(b), such member shall promptly pay the amount of such Tax benefit to the member whose Tax deduction was so disallowed. (c) Applicability. The provisions of this Section 306 shall apply -------------- notwithstanding any other provisions of this agreement. SECTION 3.07. Indemnification. (a) Indemnification Obligations. ---------------- ---------------------------- Olin and Arch shall each indemnify, defend and hold harmless the members of the other party's Affiliated Group from and against any and all Taxes for which Olin or Arch is liable pursuant to this Agreement. The amount of all indemnification obligations for payments described in Sections 3.03, 3.04, 3.05 and 3.06 shall be calculated on an after-Tax basis. (b) No Indemnification for Tax Attributes. Nothing in this Agreement -------------------------------------- shall be construed as a guarantee of the existence or amount of any loss, credit, carryforward, basis or other Tax attribute, whether past, present or future, of the Companies or any members of their respective Affiliated Groups. (c) Indemnity Payments. To the extent that one Party (the ------------------- "Indemnifying Party") has an indemnification obligation to another party (the "Indemnitee") pursuant to this Agreement, the Indemnitee shall provide the Indemnifying Party with its calculation of the amount of such indemnification payment. Such calculation shall provide sufficient detail to permit the Indemnifying Party to reasonably understand the calculations. The Indemnifying Party shall make the required payment to the Indemnitee within 14 business days after receiving the Indemnitee's calculations, and in no event less than 10 business days prior to the due date (including extensions) of any relevant Tax Return, unless the Indemnifying Party reasonably disputes the amount of, or its liability for, such payment. All such disputes regarding payments shall be resolved pursuant to the procedures in Section 5.02 of this Agreement. Interest shall accrue with respect to any payment not made within 10 days after the due date for such payment, at the underpayment rate in effect under the Code at such time, until such amounts are fully paid. Interest shall accrue with respect to disputed payments, and shall be payable with respect to, and when any portion of such payments are subsequently required to be made. (d) Right of Offset. Any party making a payment under this Agreement ---------------- shall have the right to reduce any such payment by any amounts owed to it by the other party to this Agreement. (e) Treatment of Payments. The parties agree that any payments made ---------------------- to one party by another party pursuant to this Agreement shall be treated for all Tax and financial accounting purposes as nontaxable payments (dividends or capital contributions, as the case may be) made immediately prior to the Distribution, unless, and then only to the extent, otherwise required by a Final Determination. ARTICLE IV Tax Proceedings; Cooperation and Exchange of Information -------------------------------------------------------- SECTION 4.01. Tax Proceedings. (a) Notification. Within 15 days ---------------- ------------- after a party becomes aware of the existence of a Tax issue that may give rise to an indemnification obligation under this Agreement (an "Indemnity Issue"), such party shall notify the other party of the Indemnity Issue, and thereafter shall promptly forward to the other party copies of notices and material communications with a Taxing Authority relating to such issue (e.g., any IRS ---- revenue agent's reports or similar reports, notices of proposed adjustment, or notices of deficiency). (b) Control of Pre-Distribution Tax Proceedings. Except as provided -------------------------------------------- in Section 4.01(c), Olin shall control, and shall have sole discretion in handling, settling or contesting any audit inquiry, information request, audit proceeding, suit, action or contest (each, a "Tax Proceeding") that relates to a (i) Pre-Distribution Period Tax liability or refund (a "Tax Claim") (including a Tax Claim with respect to a Straddle Period) that is not related to a Straddle Period Tax Return filed by Arch, or (ii) GRA Tax Liability. Arch shall control any Tax Proceeding that relates to a Tax Claim with respect to a Straddle Period Tax Return filed by Arch. Neither party shall settle any Tax Proceeding that they control concerning a Straddle Period Tax Claim on a basis that would materially adversely affect the noncontrolling party without obtaining such noncontrolling party's consent, which consent shall not be unreasonably withheld if failure to consent would adversely 11 affect the controlling party. Any costs incurred in handling, settling or contesting a Tax controversy shall be borne by the party controlling the Tax controversy. (c) Control of Distribution Tax Proceedings. Olin and Arch shall ---------------------------------------- jointly control, and shall each have the right to participate in all activities and strategic decisions with respect to, any Tax Proceedings relating to Distribution Taxes. Either Company may assume sole control of a Distribution Tax Proceeding if it acknowledges in writing that it has sole liability for any Distribution Taxes that might arise in such Proceeding. No Tax Proceeding with respect to Distribution Taxes shall be settled without the consent of the Indemnifying Party, which consent shall not be unreasonably withheld if failure to consent would adversely affect the other party. SECTION 4.02. Cooperation and Exchange of Information. (a) Arch and ---------------------------------------- Olin shall each cooperate fully (and each shall cause each member of its respective Affiliated Group to cooperate fully) with all reasonable requests from the other party in connection with the preparation and filing of Tax Returns, claims for refund, and Tax Proceedings concerning issues or other matters covered by this Agreement. Such cooperation shall include, without limitation: (i) the retention until the expiration of the applicable statute of limitations, and the provision upon request, of Tax Returns, books, records (including information regarding ownership and tax basis of property), documentation and other information relating to the Tax Returns, including accompanying schedules, related work papers, and documents relating to rulings or other determinations by Taxing Authorities; (ii) the execution of any document that may be necessary or reasonably helpful in connection with any Tax Proceeding, or the filing of a Tax Return or refund claim by a member of the Olin or Arch Affiliated Group, including certification, to the best of a party's knowledge, of the accuracy and completeness of the information it has supplied; and (iii) the use of the parties' best efforts to obtain any documentation that may be necessary or reasonably helpful in connection with any of the foregoing. 12 Each party shall make its employees and facilities available on a reasonable and mutually convenient basis in connection with the foregoing matters. (b) If a party fails to comply with any of its obligations set forth in Section 4.02(a) of this Agreement upon reasonable request and notice by the other party, and such failure results in the imposition of additional Taxes, the nonperforming party shall be liable in full for such additional Taxes. SECTION 4.03. Retention of Information. A party intending to dispose ------------------------- of documentation of Olin or Arch or any member of its respective Affiliated Group, including without limitation, books, records, Tax Returns and all supporting schedules and information relating thereto (after the expiration of the applicable statute of limitations), shall provide written notice to the other party describing the documentation to be destroyed or disposed of 60 days prior to taking such action. The other party may arrange to take delivery of the documentation described in the notice at its expense during the succeeding 60 day period. ARTICLE V Miscellaneous Provisions ------------------------ SECTION 5.01. Notice. Any payment, notice or communication required ------- or permitted to be given under this Agreement shall be in writing (including facsimile) and mailed, faxed or delivered to the parties at the following addresses (or at such other address as one party may specify by notice to the other party): If to Olin to: Olin Corporation 501 Merritt 7 PO Box 4500 Norwalk, CT 06856-4500 Attention: If to Arch: Arch Chemicals, Inc. 501 Merritt 7 Norwalk, CT. 06851 Attention: 13 Notification of a change of address shall be given by either party to the other as provided in this Section 5.01. All such notices and communications shall be effective (i) when received, if mailed or delivered, or (ii) when confirmed by fax answerback, if faxed. SECTION 5.02. Resolution of Disputes. (a) The party required to file ----------------------- a Straddle Period Tax Return under Section 2.01 (the "Filing Party") shall provide the other party (the "Non-Filing Party") with a calculation and determination of the amount of the Straddle Period Taxes the Non-Filing Party is required to pay to the Filing Party pursuant to Section 3.02(a) or (b) (a "Tax Determination"). In the absence of a controlling change in law or circumstances, all Tax Determinations shall be prepared in a manner consistent with the elections, accounting methods, conventions, and principles of taxation used for the most recent taxable periods for which Tax Returns involving similar Tax items have been filed. If the Non-Filing Party disputes such Tax Determination, it may make a written request that the Filing Party obtain written confirmation from a "Big Five" certified public accounting firm (the "Accounting Firm") that the Tax Determination is (i) consistent with the preceding sentence, and (ii) supported by substantial authority (such written confirmation, a "Confirmation"). If the Accounting Firm issues a Confirmation, the applicable Tax Determination shall be binding upon the parties. If not, the Filing Party shall amend the Tax Determination to permit a Confirmation to be issued in respect of the amended Tax Determination. If a dispute is not resolved prior to the due date of a Tax Return, the Tax Return shall be filed in accordance with the Tax Determination, and the Companies hereby agree to file an amended return, if necessary. (b) The Accounting Firm shall be mutually acceptable to Olin and Arch and may not be the auditor of, or primary tax advisor for, either Olin or Arch in the year in which such Confirmation is to be made or with respect to the taxable period subject to such Confirmation. The Accounting Firm shall treat all Tax Returns of the Companies as confidential, and shall not reveal any information contained in, or any part of, the Tax Returns of one party to the other without obtaining written consent to do so. The Non-Filing Party shall be liable for the fees and disbursements of the Accounting Firm unless the amounts of the Tax payments (excluding interest thereon) required under an amended Tax Determination differ by more than the greater of (i) $100,000 or (ii) 10% from the payments under the 14 original Tax Determination (excluding any interest), in which case the Filing Party shall be liable for such fees and disbursements. (c) All other disputes with respect to the interpretation, performance, non-performance, validity or breach of this Agreement shall be settled pursuant to the procedures set forth in Section 5.01 of the Distribution Agreement. SECTION 5.03. Governing Law. This Agreement shall be governed by the -------------- laws applicable to contracts entered into and to be performed within the State of Connecticut by residents thereof. SECTION 5.04 Binding Effect; Successors. This Agreement shall be --------------------------- binding upon the parties hereto and shall inure to the benefit of and be binding upon any of their successors or assigns. SECTION 5.05 Entire Agreement; Assignment. This Agreement embodies ----------------------------- the entire understanding between the parties relating to its subject matter and supersedes and terminates all prior agreements and understandings among the parties with respect to such matters. No promises, covenants or representations of any kind, other than those expressly stated herein, have been made to induce any party to enter into this Agreement. This Agreement shall not be modified or terminated except by a writing duly signed by each of the parties hereto, and no waiver of any provisions of this Agreement shall be effective unless in a writing duly signed by the party sought to be bound. If, and to the extent, the provisions of this Agreement conflict with the Distribution Agreement, or any other agreement entered into in connection with the Distribution, the provisions of this Agreement shall control. SECTION 5.06. Counterparts. This Agreement may be executed in two or ------------- more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same. SECTION 5.07. Severability. If any provision of this Agreement or ------------- the application of any such provision to any person or circumstances shall be held invalid, illegal o unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof. 15 SECTION 5.08. Headings. Headings of sections in this Agreement are --------- inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed by its respective duly authorized officer of the date first set forth above. OLIN CORPORATION, by____________________________ Name: Title: ARCH CHEMICALS, INC., by____________________________ Name: Title: EX-10.9 14 INTELLECTUAL PROPERTY TRANSFER & LICENSE AGREEMENT EXHIBIT 10.9 INTELLECTUAL PROPERTY TRANSFER AND LICENSE AGREEMENT BY AND BETWEEN OLIN CORPORATION AND ARCH CHEMICALS, INC. CONFIDENTIAL DRAFT DEC. 29, 1998 TABLE OF CONTENTS ----------------- 1. DEFINITIONS....................................................... 3 2. ASSIGNMENT OF INTELLECTUAL PROPERTY............................... 6 3. LICENSES.......................................................... 7 4. SECRECY........................................................... 9 5. DURATION AND TERMINATION.......................................... 10 6. RIGHTS UPON TERMINATION OTHER THAN UNDER SECTION 5.1.............. 11 7. FORCE MAJEURE..................................................... 12 8. GUARANTEES, LIABILITIES AND INDEMNITIES........................... 12 9. NOTICES........................................................... 12 10. EXPORTATION CONTROL.............................................. 13 11. ASSIGNMENT....................................................... 13 12. MISCELLANEOUS.................................................... 14 13. SETTLEMENT OF DISPUTES........................................... 15 EXHIBIT A............................................................ 17 EXHIBIT B............................................................ 18 EXHIBIT C............................................................ 19 EXHIBIT D............................................................ 20 EXHIBIT E............................................................ 25
Page 2 CONFIDENTIAL DRAFT DEC. 29, 1998 INTELLECTUAL PROPERTY TRANSFER AND LICENSE AGREEMENT THIS AGREEMENT is made and entered into as of this ___ day of, __________ 1999 by and between: OLIN CORPORATION, having a place of business at 501 Merritt 7, Norwalk, CT 06856 (hereinafter referred to as "OLIN") AND ARCH CHEMICALS, INC., having a place of business at 501 Merritt 7, Norwalk, CT 06856-4500 (hereinafter referred to as "ARCH") (hereinafter collectively the "PARTIES " and each individually a "PARTY"). W I T N E S S E T H: - - - - - - - - - -- WHEREAS, OLIN and ARCH have entered into a Distribution Agreement of even date herewith concerning the spin-off of ARCH from OLIN (the "Distribution Agreement"); WHEREAS, prior to entering into the Distribution Agreement, OLIN possesses certain INTELLECTUAL PROPERTY, TECHNOLOGY and trademarks primarily used in the ARCH Business (as defined below), as the ARCH Business was part of a single corporate entity and parent-subsidiary corporate structure; WHEREAS, ARCH desires to own or have the right to use such certain INTELLECTUAL PROPERTY, TECHNOLOGY and trademarks used in the ARCH Business; WHEREAS, to allow each of OLIN and ARCH to obtain the full value of its respective rights under the Distribution Agreement, ARCH and OLIN desire to enter into and execute this AGREEMENT concerning the assignment and licensing of certain INTELLECTUAL PROPERTY and TECHNOLOGY; NOW, THEREFORE, in consideration of the above, and the mutual promises set forth below, OLIN and ARCH agree as follows: 1. DEFINITIONS - ---------------- Whenever used in this agreement, the following terms shall have the following meanings, on the understanding that words in the singular include the plural and vice versa. Headings and subheadings are used for convenience only and are not intended as limitations in the AGREEMENT or for use in interpreting the AGREEMENT. 1.1 AFFILIATE - -------------- "AFFILIATE" shall mean, when used with respect to a specified PERSON, another PERSON that directly, or indirectly through one or more intermediaries, CONTROLS or is CONTROLLED by or is under common CONTROL with the PERSON specified. Page 3 CONFIDENTIAL DRAFT DEC. 29, 1998 1.2 AGREEMENT - -------------- "AGREEMENT" shall mean this agreement as amended and/or supplemented from time to time, including all the EXHIBITS attached hereto. 1.3 ARCH BUSINESS - ------------------ "ARCH BUSINESS" shall have the meaning assigned to such term in the DISTRIBUTION AGREEMENT. 1.4 ARCH INTELLECTUAL PROPERTY - ------------------------------- "ARCH INTELLECTUAL PROPERTY" shall mean the INTELLECTUAL PROPERTY set forth in EXHIBIT A. 1.5 ARCH PRODUCTS - ------------------ "ARCH PRODUCTS" shall mean those products which were made by the ARCH BUSINESS or its constituent companies and their predecessor companies on or before the EFFECTIVE DATE and products acquired, developed or established by or for ARCH or any of its AFFILIATES after the EFFECTIVE DATE. Notwithstanding the foregoing, ARCH PRODUCTS shall, without limitation, not include PRODUCTS for pulp and paper ---- applications, TYSAR(R) electrodes and OMNX(R) software. 1.6 ARCH TECHNOLOGY - -------------------- "ARCH TECHNOLOGY" shall mean all the TECHNOLOGY, other than JOINT TECHNOLOGY, which was used by or derived from efforts by or on behalf of the ARCH BUSINESS or its constituent companies and its predecessors on or before the EFFECTIVE DATE. 1.7 ARCH TRADEMARKS - -------------------- "ARCH TRADEMARKS" shall mean the trademarks set forth in EXHIBIT B. 1.8 CONFIDENTIAL INFORMATION - ----------------------------- "CONFIDENTIAL INFORMATION" shall mean any and all information disclosed to the receiving PARTY by the disclosing PARTY pursuant to the AGREEMENT, in any form such as, but not limited to, visual, oral, written, graphic, electronic or model form, including but not limited to know-how and trade secrets, whether patented or not and whether in the laboratory, pilot plant or commercial plant stage (including drawings, operating conditions, specifications, safety instructions, recommendations for effluent disposal, emergency instructions, etc.) owned or controlled by a PARTY. 1.9 CONTROL - ------------ "CONTROL" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms "CONTROLLING" and "CONTROLLED" shall have meanings correlative thereto. Page 4 CONFIDENTIAL DRAFT DEC. 29, 1998 1.10 DISTRIBUTION AGREEMENT - --------------------------- "DISTRIBUTION AGREEMENT" shall have the meaning specified in the recitals. 1.11 EFFECTIVE DATE - ------------------- "EFFECTIVE DATE" shall mean the Distribution Date specified in the DISTRIBUTION AGREEMENT. 1.12 INTELLECTUAL PROPERTY - -------------------------- "INTELLECTUAL PROPERTY" shall mean all Memoranda of Invention, and all classes or types of patents, utility models, design patents, copyrights and applications for the aforementioned, of all countries of the world, owned by a PARTY and in existence on or before the EFFECTIVE DATE. 1.13 JOINT INTELLECTUAL PROPERTY - -------------------------------- "JOINT INTELLECTUAL PROPERTY" shall mean the INTELLECTUAL PROPERTY in existence on or before the EFFECTIVE DATE as set forth in Exhibit C. 1.14 JOINT TECHNOLOGY - --------------------- "JOINT TECHNOLOGY" shall mean TECHNOLOGY in existence on or before the EFFECTIVE DATE as set forth in Exhibit C. 1.15 OLIN BUSINESS - ------------------ "OLIN BUSINESS" shall have the meaning assigned to such term in the DISTRIBUTION AGREEMENT. 1.16 OLIN INTELLECTUAL PROPERTY - ------------------------------- "OLIN INTELLECTUAL PROPERTY" shall mean the INTELLECTUAL PROPERTY owned by OLIN on or before the EFFECTIVE DATE other than the ARCH INTELLECTUAL PROPERTY. 1.17 OLIN PRODUCTS - ------------------ "OLIN PRODUCTS" shall mean those products which were made by the OLIN BUSINESS or ITS constituent companies and their predecessor companies on or before the EFFECTIVE DATE and products acquired, developed or established by or for OLIN or any of its AFFILIATEs after the EFFECTIVE DATE. Notwithstanding the foregoing, OLIN PRODUCTS shall, without limitation, not include calcium hypochlorite or ---- PRODUCTS for swimming pool, spa or hot tub applications. 1.18 OLIN TECHNOLOGY - -------------------- "OLIN TECHNOLOGY" shall mean all the TECHNOLOGY, other than JOINT TECHNOLOGY, which was used by or derived from efforts by or on behalf of the OLIN BUSINESS on or before the EFFECTIVE DATE. 1.19 PERSON - ----------- "PERSON" shall mean any natural person, corporation, business trust, joint venture, association, company, partnership or government, or any agency or political sub-division thereof. Page 5 CONFIDENTIAL DRAFT DEC. 29, 1998 1.20 PRODUCTS - ------------- "PRODUCTS" shall mean the OLIN PRODUCTS and the ARCH PRODUCTS. 1.22 TECHNOLOGY - --------------- "TECHNOLOGY" shall mean the body of knowledge owned by a PARTY and in existence as of the EFFECTIVE DATE including: (i) information such as technical, engineering, maintenance, environmental and safety information with respect to the design, equipment selection, construction, installation, staffing and operation of facilities and equipment for the manufacture of PRODUCTS; (ii) formulae, process drawings and descriptions, chemical recipes, know-how, and technological and processing information, for the manufacture, development, packaging and handling of PRODUCTS; and (iii) specifications and properties of the PRODUCTS. 1.23 TERM - --------- "TERM" shall mean the period of time during which the AGREEMENT shall be in full force and effect pursuant to ARTICLE 6. 2. ASSIGNMENT OF INTELLECTUAL PROPERTY - ---------------------------------------- 2.1 ASSIGNMENTS - ---------------- OLIN agrees to assign and transfer to ARCH, and shall cause its AFFILIATES to assign and transfer to ARCH, as of the EFFECTIVE DATE: (i) all of its and its AFFILIATES right, title and interest, together with all rights of priority, in and to the ARCH INTELLECTUAL PROPERTY and the ARCH TECHNOLOGY; and (ii) all of its and its AFFILIATES right, title and interest, together with all rights of priority in and to the ARCH TRADEMARKS and the good will of the businesses to which they relate; provided that such ARCH TECHNOLOGY, ARCH INTELLECTUAL PROPERTY and ARCH TRADEMARKS are owned by OLIN or its AFFILIATES as of the EFFECTIVE DATE. The assignment documents pursuant to this Section 2.1 shall be substantially in the form as set forth in EXHIBIT D. In the event that ARCH INTELLECTUAL PROPERTY, ARCH TECHNOLOGY and ARCH TRADEMARKS are owned by AFFILIATES of OLIN which as of the EFFECTIVE DATE are part of the ARCH BUSINESS then such ARCH INTELLECTUAL PROPERTY, ARCH TECHNOLOGY and ARCH TRADEMARKS shall be considered as having been assigned to ARCH pursuant to this Section 2.1. 2.2 PRE-EXISTING LICENSE OBLIGATIONS - ------------------------------------- ARCH INTELLECTUAL PROPERTY, ARCH TECHNOLOGY, ARCH TRADEMARKS, JOINT INTELLECTUAL PROPERTY and JOINT TECHNOLOGY (hereinafter "ARCH IP Assets") may be subject to one or more pre-existing obligations which were granted by OLIN or its AFFILIATES. Solely to the extent that such pre-existing obligations relate to ownership, use, license or assignment of the ARCH IP Assets they shall comprise "Pre-existing Obligations". Pre-existing Obligations shall include without limitation, those obligations set forth in the agreements listed in EXHIBIT E. To the extent that ARCH IP Assets are subject to such Pre-existing Obligations ARCH agrees to be bound by the Pre-existing Obligations whether such agreements are transferred to ARCH pursuant to the Distribution Agreement or are retained by OLIN. OLIN will identify to ARCH and provide ARCH with copies of the Pre- existing Obligations. Page 6 CONFIDENTIAL DRAFT DEC. 29, 1998 2.3 DISCLAIMER - --------------- OLIN MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE ARCH INTELLECTUAL PROPERTY OR ARCH TECHNOLOGY OR ARCH TRADEMARKS, ASSIGNED HEREBY, INCLUDING WITHOUT LIMITATION AS TO THEIR VALIDITY, ENFORCEABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE. 3. LICENSES - ------------- 3.1 GENERAL LICENSE TO ARCH - ---------------------------- OLIN hereby grants and shall cause its AFFILIATES to grant to ARCH an irrevocable, royalty free, worldwide, nonexclusive license, with the right to sublicense, to use the OLIN TECHNOLOGY and OLIN INTELLECTUAL PROPERTY, which have been used by or on behalf of the ARCH BUSINESS on or before the EFFECTIVE DATE, solely for the making, having made, use, offering for sale, selling and import of ARCH PRODUCTS, provided that no rights or licenses are granted with respect to PRODUCTS other than ARCH PRODUCTS. 3.2 JOINT PROPERTY LICENSE TO ARCH - ----------------------------------- OLIN hereby grants and shall cause its AFFILIATES to grant to ARCH an irrevocable, royalty free, worldwide, nonexclusive license, with the right to sublicense, to use the JOINT INTELLECTUAL PROPERTY and JOINT TECHNOLOGY solely for the making, having made, use, offering for sale, selling and import of ARCH PRODUCTS, provided that no rights or licenses are granted with respect to PRODUCTS other than ARCH PRODUCTS. 3.3 ARCH OPTION FOR FUTURE LICENSE - ----------------------------------- OLIN hereby grants and shall cause its AFFILIATES to grant to ARCH an option to nonexclusively license, upon reasonable terms and conditions to be agreed upon, the use of the OLIN TECHNOLOGY and OLIN INTELLECTUAL PROPERTY known to ARCH on or before the EFFECTIVE DATE but which have not been used by or on behalf of the ARCH BUSINESS on or before the EFFECTIVE DATE, solely for the making, having made, use, offering for sale, selling and import of ARCH PRODUCTS, provided that no rights or licenses will be granted with respect to PRODUCTS other than ARCH PRODUCTS. 3.4 GENERAL LICENSE TO OLIN - ---------------------------- ARCH hereby grants and shall cause its AFFILIATES to grant to OLIN an irrevocable, royalty free, worldwide, nonexclusive license, with the right to sublicense, to use the ARCH INTELLECTUAL PROPERTY and the ARCH TECHNOLOGY, which have been used by or on behalf of OLIN in the OLIN BUSINESS on or before the EFFECTIVE DATE, solely for the making, having made, use, offering for sale, selling and import of OLIN PRODUCTS, provided that no rights or licenses are granted with respect to PRODUCTS other than OLIN PRODUCTS. 3.5 JOINT PROPERTY LICENSE TO OLIN - ----------------------------------- ARCH hereby grants and shall cause its AFFILIATES to grant to OLIN an irrevocable, royalty free, worldwide, nonexclusive license, with the right to sublicense, to use the JOINT INTELLECTUAL PROPERTY and JOINT TECHNOLOGY solely for the making, having made, use, offering for sale, selling and import of OLIN PRODUCTS, provided that no rights or licenses are granted with respect to PRODUCTS other than OLIN PRODUCTS. Page 7 CONFIDENTIAL DRAFT DEC. 29, 1998 3.6 OLIN OPTION FOR FUTURE LICENSE - ----------------------------------- ARCH hereby grants and shall cause its AFFILIATES to grant to OLIN an option to nonexclusively license, upon reasonable terms and conditions to be agreed upon, the use of the ARCH TECHNOLOGY and ARCH INTELLECTUAL PROPERTY known to OLIN on or before the EFFECTIVE DATE but which have not been used by or on behalf of the OLIN BUSINESS on or before the EFFECTIVE DATE, solely for the making, having made, use, offering for sale, selling and import of OLIN PRODUCTS, provided that no rights or licenses will be granted with respect to PRODUCTS other than OLIN PRODUCTS. 3.7 CONTINGENT LICENSE TO OLIN - ------------------------------- The PARTIES acknowledge that OLIN has guaranteed the performance of ARCH with respect to certain contracts with the government of the United States of America (hereinafter referred to as the "Government Contracts"). In the event of a default by ARCH under such Government Contracts and the exercise by the government of its rights under the OLIN guarantee, ARCH and its AFFILIATES hereby grant to OLIN a royalty free, worldwide, nonexclusive license, with the right to sublicense, to use the ARCH TECHNOLOGY and ARCH INTELLECTUAL PROPERTY for the sole purpose of enabling OLIN to fulfill ARCH's obligations under such Government Contracts defaulted by ARCH. In such event ARCH and its AFFILIATES agree to cooperate with OLIN and take all reasonable actions which are deemed necessary by OLIN to enable OLIN to fulfill ARCH's or its AFFILIATE's obligations under such Government Contracts, including without limitation, disclosing to OLIN any ARCH TECHNOLOGY reasonably requested by OLIN in order to fulfill such obligations. 3.8 SUBLICENSE TERMS - --------------------- Any sublicense granted pursuant to this ARTICLE 3 shall be consistent with and subject to the terms and conditions of this AGREEMENT. 3.9 LIMITATIONS - ---------------- All licenses granted herein are subject to any pre-existing rights or licenses granted by Olin to a third party. Notwithstanding any other provision of this AGREEMENT, no PARTY or its AFFILIATES shall be obligated to: (i) grant any license, or make any disclosure, to the other PARTY, with respect to INTELLECTUAL PROPERTY, owned or controlled by such PARTY or its AFFILIATES, if to do so would violate an agreement with an unrelated third party or (ii) grant any license, to the other PARTY, with respect to INTELLECTUAL PROPERTY, which are owned or controlled by such PARTY or its AFFILIATES, if to do so would be in violation of law. If the violation can be avoided by a lesser license, then the PARTIES or their AFFILIATES agree to grant same to the extent possible. The PARTIES or their AFFILIATES shall use reasonable commercial efforts to avoid such restrictions in agreements entered into following the EFFECTIVE DATE. Notwithstanding any other provision of this AGREEMENT, following the EFFECTIVE DATE, neither PARTY or their AFFILIATES shall be obligated to make any further disclosure to the other PARTY with respect to any TECHNOLOGY or INTELLECTUAL PROPERTY licensed hereunder. 3.10 THIRD PARTY ROYALTIES - -------------------------- If a licensor under this ARTICLE 3 is obligated to pay royalties to a third party with respect to a license or right granted herein, then notwithstanding the above, the licensee shall be obligated to pay such royalties as a condition of its license. Page 8 CONFIDENTIAL DRAFT DEC. 29, 1998 3.11 WARRANTY - --------------- The PARTIES warrant that, except as set forth in this Agreement, they have not granted and will not grant any licenses which will conflict with the rights and licenses set forth in this AGREEMENT. The PARTIES also warrant that they have the right to grant the rights and licenses set forth in this Agreement. NO OTHER WARRANTY, OF ANY KIND, WHETHER EXPRESS OR IMPLIED, IS GIVEN BY ONE PARTY TO THE OTHER PARTY AND IN PARTICULAR THE PARTIES DISCLAIM ANY WARRANTY THAT THEIR RESPECTIVE INTELLECTUAL PROPERTIES OR TECHNOLOGY ARE VALID OR ENFORCEABLE OR USEFUL FOR ANY PURPOSE. 3.12 EXPRESS LICENSES ONLY - ---------------------------- Except for licenses expressly granted pursuant to ARTICLE 3, no licenses are granted hereby, and nothing in the AGREEMENT shall be construed as, or result in, conveying by implication, waiver or estoppel any right or license to either PARTY or to any third party. No license of any kind, express or implied, is granted pursuant to this Agreement with respect to the use by ARCH of OLIN TRADEMARKS. No license of any kind, express or implied, is granted pursuant to this Agreement with respect to the use by OLIN of ARCH TRADEMARKS. 3.13 ABANDONING INTELLECTUAL PROPERTY - --------------------------------------- If either PARTY wishes to abandon in any country any JOINT INTELLECTUAL PROPERTY right or application therefor licensed hereunder, it shall not do so without first notifying the other PARTY and giving it a reasonable opportunity to take over the prosecution or maintenance of such JOINT INTELLECTUAL PROPERTY right at its own expense. If the other PARTY agrees to take over the prosecution and maintenance of such INTELLECTUAL PROPERTY the abandoning PARTY shall transfer its interest therein to such other PARTY. 4. SECRECY - -------------- 4.1 SECRECY OBLIGATION - ------------------------- Each of the PARTIES agrees to keep confidential and neither disclose to others nor use except as permitted herein any CONFIDENTIAL INFORMATION received from the other PARTY or its AFFILIATES pursuant to the AGREEMENT. 4.2 LIMITS ON DISCLOSURE - --------------------------- The receiving PARTY shall treat such CONFIDENTIAL INFORMATION in the same manner and with the same degree of care as it uses with respect to its own CONFIDENTIAL INFORMATION of like nature (and in any event with no less of a degree of care than is reasonable for such CONFIDENTIAL INFORMATION) and shall disclose CONFIDENTIAL INFORMATION of the other PARTY only to its employees who have a need to know it, provided that such employees agree in writing to be bound by all confidentiality obligations provided for in the AGREEMENT. Page 9 CONFIDENTIAL DRAFT DEC. 29, 1998 4.3 EXCEPTIONS - ----------------- The obligation set forth in Section 4.1 shall not apply with respect to any CONFIDENTIAL INFORMATION which: 4.3.1 PUBLIC KNOWLEDGE - ------------------------ Is generally available to the public or subsequently becomes generally available to the public through no breach by the receiving PARTY of secrecy obligations under this Agreement or prior agreements between the PARTIES concerning the CONFIDENTIAL INFORMATION; or 4.3.2 RECEIVED FROM THIRD PARTY - -------------------------------- Is received from a third party who is legally free to disclose such CONFIDENTIAL INFORMATION and who did not receive such CONFIDENTIAL INFORMATION in confidence from the disclosing PARTY; or 4.3.3 APPROVED FOR DISCLOSURE - ------------------------------ Is approved in writing for release by the disclosing PARTY or its AFFILIATES; or 4.3.4 INDEPENDENTLY DEVELOPED - ------------------------------ Is independently developed by the receiving PARTY without reference to the CONFIDENTIAL INFORMATION received from the disclosing PARTY or its AFFILIATES. 4.4 PERMITTED DISCLOSURES - ---------------------------- The provisions of Section 4.1 notwithstanding, in exercising the rights granted under the AGREEMENT, any PARTY may disclose CONFIDENTIAL INFORMATION to others for purpose of licensing (as permitted hereunder), design, engineering, construction or operation of permitted facilities using the disclosing PARTY's or its AFFILIATES licensed TECHNOLOGY; or obtaining or giving consulting services under a license agreement permitted hereunder, provided that any third party, to which such CONFIDENTIAL INFORMATION is disclosed shall have first entered into a written secrecy and non-use agreement imposing obligations on such party that are at least as stringent as those imposed on the PARTIES pursuant to the AGREEMENT. 4.5 SUBPOENA OR DEMAND - ------------------------- The provisions of Section 4.1 notwithstanding, a PARTY may disclose CONFIDENTIAL INFORMATION pursuant to a subpoena or demand for production of documents in connection with any suit or arbitration proceeding, any administrative procedure or before a governmental or administrative agency or instrumentality thereof or any legislative hearing or other similar proceeding, provided that the receiving PARTY shall promptly notify the disclosing PARTY or its AFFILIATES of the subpoena or demand and provided further that in such instances, the PARTIES use their best efforts to maintain the confidential nature of the CONFIDENTIAL INFORMATION by protective order or other means. 5. DURATION AND TERMINATION - ------------------------------- Page 10 CONFIDENTIAL DRAFT DEC. 29, 1998 5.1 TERM OF AGREEMENT - ------------------------ This AGREEMENT shall become effective on the EFFECTIVE DATE, and shall continue in full force and effect until the expiration of the last to expire of the INTELLECTUAL PROPERTY licensed hereunder or ten (10) years from the EFFECTIVE DATE, which ever is greater, at which time this AGREEMENT shall terminate unless renewed by agreement of the PARTIES. After expiration of the AGREEMENT pursuant to this Section 5.1 the rights and obligations set forth in ARTICLES 3, 4, and 10 shall survive. 5.2 TERMINATION FOR MATERIAL BREACH - -------------------------------------- If either PARTY commits a material breach with respect to any of their obligations hereunder, the other PARTY may give written notice to the allegedly breaching PARTY specifying the alleged material breach and an intention to terminate the AGREEMENT. The PARTY charged with the alleged material breach shall have sixty (60) days from the date of receipt of such written notice to cure the alleged material breach. If the alleged material breach is not cured within said sixty (60)-day period, the other PARTY may terminate the AGREEMENT by sending a written notice of termination to the breaching PARTY and in this event, neither PARTY waives any legal rights to recover damages resulting from the termination of the AGREEMENT. 5.3 INSOLVENCY - ----------------- In the event that either PARTY shall: (i) become insolvent or go into liquidation or receivership or be admitted to the benefits of any procedure for the settlement or postponement of debts or be declared bankrupt; or (ii) become party to dissolution proceedings; then the AGREEMENT and any and all obligations assumed hereby (except as otherwise expressly provided for herein) may be terminated by the other PARTY, if permitted by law, by giving written notice of such termination on a date specified therein. 6. RIGHTS UPON TERMINATION OTHER THAN UNDER SECTION 5.1 - ----------------------------------------------------------- 6.1 TERMINATION OF LICENSES - ------------------------------ Notwithstanding the foregoing, the licenses granted under ARTICLE 3 to the PARTY committing the material breach under Section 5.2, may be canceled immediately by the non-breaching PARTY terminating the AGREEMENT and such breaching PARTY shall promptly forward to the non-breaching PARTY all copies of CONFIDENTIAL INFORMATION, blue prints, drawings and data which it may have in written or graphic or machine readable form and which have been proposed or reproduced by it from the CONFIDENTIAL INFORMATION received from the other PARTY. The termination of this AGREEMENT pursuant to Section 5.2 shall not affect the rights and licenses previously granted to the non-breaching PARTY, which shall continue in full force and effect. 6.2 OBLIGATIONS SURVIVING TERMINATION - ---------------------------------------- Upon termination pursuant to Sections 5.2 or 5.3, the obligations of each PARTY to the other shall cease except, subject to Section 6.1, the obligations set forth in ARTICLES 3, 4 and 10 shall continue in full force and effect until completely discharged. Page 11 CONFIDENTIAL DRAFT DEC. 29, 1998 7. FORCE MAJEURE - -------------------- 7.1 ACTS CONSTITUTING FORCE MAJEURE - -------------------------------------- Neither PARTY shall be liable to the other arising out of a delay in its performance of this Agreement arising from causes beyond its reasonable control. Without limiting the generality of the foregoing, such events include any act of God; accident; explosion; fire; earthquake; flood; strikes; labor disputes; riots; sabotage; embargo; equipment failure; federal, state, or local legal restriction or limitation; failure or delay of transportation; shortage of, or inability to obtain, raw materials, supplies, equipment, fuel, electricity, or labor. Neither PARTY shall be required to resolve labor disputes or disputes with suppliers of raw material, supplies, equipment, fuel, or electricity, but shall use commercially reasonable efforts to seek alternative sources to the extent practicable. 7.2 NOTICE REQUIREMENT - ------------------------- When circumstances occur which delay the performance of either PARTY under this Agreement, whether or not such circumstances are excused pursuant to Section 7.1 above, said PARTY shall, when it first becomes aware of such circumstances, promptly notify (or, if the circumstances occur on a holiday or weekend, on the first succeeding business day) the other PARTY, by facsimile or by telephone confirmed in writing within two (2) business days in the case of oral notice. Within ten (10) business days of the date when either PARTY first becomes aware of the event which it contends is responsible for the delay, it shall supply to the other PARTY in writing the reason(s) for and anticipated duration of such delay, the measures taken and to be taken to prevent or minimize the delay, and the timetable for the implementation of such measures. 8. GUARANTEES, LIABILITIES AND INDEMNITIES - ---------------------------------------------- 8.1 LAWFUL POSSESSION - ------------------------ Each PARTY represents that to the best of its knowledge and belief, it will be in the lawful possession of any CONFIDENTIAL INFORMATION when disclosed by it pursuant to the AGREEMENT and that the disclosure of said CONFIDENTIAL INFORMATION shall not in any way violate any agreement to hold such CONFIDENTIAL INFORMATION in confidence. 8.2 DISCLAIMER - ----------------- Neither PARTY shall be liable to the other for indirect, special or consequential damages arising out of any use of CONFIDENTIAL INFORMATION, INTELLECTUAL PROPERTY or TECHNOLOGY rights obtained by it from the other PARTY hereunder. 9. NOTICES - -------------- Notices or requests to be given or made hereunder shall be delivered in person or sent by registered mail or telefax or telex acknowledged by the operator of the addressee at the following addresses or other addresses that each PARTY may from time to time designate Page 12 CONFIDENTIAL DRAFT DEC. 29, 1998 (a) for ARCH: ARCH CHEMICALS, INC. 501 Merritt 7 Norwalk, Connecticut 06856-4500 ATTENTION: General Counsel Tel: Fax: (b) for OLIN: OLIN CORPORATION 501 Merritt 7 Norwalk, Connecticut 06856-4500 Attention: Corporate Secretary Tel: (203) 356-3126 Fax: (203) 356-2011 10. EXPORTATION CONTROL - -------------------------- Each PARTY agrees not to export or reexport, or cause to be exported, any CONFIDENTIAL INFORMATION furnished hereunder by the other PARTY or the equipment constructed on the basis of such CONFIDENTIAL INFORMATION, or the products manufactured with such CONFIDENTIAL INFORMATION to any country to which, under the laws of the country of origin of the CONFIDENTIAL INFORMATION, it is or may be prohibited from exporting such CONFIDENTIAL INFORMATION or the direct product thereof. 11. ASSIGNMENT - ----------------- 11.1 LIMITATIONS ON ASSIGNMENT - -------------------------------- 11.1.1 - The AGREEMENT shall not be assigned by either PARTY to a third party without the prior written consent of the other PARTY and any other assignment shall be void. 11.1.2 - Notwithstanding the foregoing, this AGREEMENT may be assigned to an AFFILIATE of a PARTY, or a successor in the business to which the AGREEMENT relates, or a successor in all or substantially all of the assets of either PARTY, provided that the successor agrees in writing to accept the rights and to be bound by the obligations of the assigning PARTY. The PARTIES agree to guarantee the performance of their AFFILIATEs under this AGREEMENT. 11.2 CHANGE OF CONTROL - ------------------------ For purposes of Section 11.1..2 the following shall be deemed an assignment by a PARTY of this AGREEMENT which shall require the written assumption of obligations provided for therein: 11.2.1: a PERSON (or two or more PERSONS acting as a "person" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934 Act")), other than such PARTY, or an employee benefit plan (or related trust) of such PARTY, becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act) of 15% or more of the then outstanding voting stock of such PARTY, or during any period of two consecutive years, individuals who at the beginning of such Page 13 CONFIDENTIAL DRAFT DEC. 29, 1998 period constitute the Board of Directors of such PARTY (together with any new director whose election by the Board or whose nomination for election by such PARTY'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 new directors then in office, and/or 11.2.2: any consolidation or merger of such PARTY in which such PARTY is not the continuing or surviving corporation or pursuant to which shares of such PARTY's common stock would be converted into cash, securities or other property other than a merger in which holders of such PARTY's common stock immediately prior to the merger will have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, and/or 11.2.3: any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of such PARTY, and/or 11.2.4: adoption of any plan or proposal for the liquidation or dissolution of such PARTY . 11.3 VIOLATION - ---------------- Any assignment made in violation of this ARTICLE 11 shall be void. 12. MISCELLANEOUS - -------------------- 12.1 ENTIRE AGREEMENT - ----------------------- The AGREEMENT embodies the entire understanding of the PARTIES. No amendment or modification of the AGREEMENT shall be valid or binding upon the PARTIES unless it is in writing and signed by the respective duly authorized officers of the PARTIES. 12.2 PARTIES ARE INDEPENDENT - ------------------------------ The AGREEMENT does not and shall not be deemed to make either PARTY the agent, legal representative or partner of the other PARTY for any purpose whatsoever, and neither PARTY shall have the right or authority to assume or create any obligation or responsibility whatsoever, expressed or implied, on behalf of or in the name of the other PARTY or to bind the other PARTY in any respect whatsoever. 12.3 WAIVER - ------------- The failure of either PARTY at any time to require performance by the other PARTY of any provision hereof shall in no way affect the full right to require such performance within a reasonable time or thereafter the performance of that and all other provisions, nor shall the waiver of any succeeding breach of such provision or any other provision operate as a waiver of the provision itself. Page 14 CONFIDENTIAL DRAFT DEC. 29, 1998 12.4 SEVERABILITY - ------------------- The invalidity or unenforceability of any one or more of the provisions of the AGREEMENT shall not affect the validity or enforceability of the remaining provisions. 12.5 GOVERNING LAW - -------------------- This Agreement shall be construed and governed, in all respects, by the law of the State of Connecticut applicable to contracts made and to be performed in that state without reference to any provisions relating to conflicts of law. 12.6 JURISDICTION - ------------------- Each PARTY hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any Connecticut State court or Federal court of the United States of America sitting anywhere within a radius of 50 miles from Norwalk, Connecticut, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the PARTIES hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Connecticut State court or, to the extent permitted by law, in such Federal court. Each of the PARTIES hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 12.7 VENUE - ------------ Each PARTY hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any Connecticut State court or such Federal court sitting within a radius of fifty (50) miles from Norwalk, Connecticut. Each of the PARTIES hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 12.8 SERVICE OF PROCESS - ------------------------- Each Party to this Agreement irrevocably consents to service of process in the manner provided for notices in ARTICLE 9 hereof. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. 13. SETTLEMENT OF DISPUTES - ----------------------------- In the event of any disputes arising out of or in connection with the execution, interpretation, performance or nonperformance of this AGREEMENT, except for disputes relating to infringement, validity or enforceability of INTELLECTUAL PROPERTY or TRADEMARKS, ARCH and OLIN shall use the following procedure prior to either PARTY pursuing other available legal remedies: 13.1 ALTERNATIVE DISPUTE RESOLUTION - ------------------------------------- Upon signing of this Agreement each PARTY will designate one representative ("Representative") for the purpose of resolving disputes which may arise from time to time. Upon a dispute arising, Page 15 CONFIDENTIAL DRAFT DEC. 29, 1998 either or both Representatives may request in writing a conference with the other. If so requested, the conference shall occur within ten (10) days of the initial written request and shall be held via telephone or at Norwalk, Connecticut, or elsewhere, at the option of the Representatives. The purpose and scope of the conference shall be limited to issues related to resolving the dispute. At the conference, each Representative, or his or her designee, shall use best efforts to attempt to resolve the dispute. If the dispute has not been settled within thirty (30) days of the first meeting of the Representatives, the parties shall establish a Management Appeal Board ("MAB") within ten (10) days of receipt of a request by either PARTY to set up an MAB. The MAB shall consist of two (2) members of each respective PARTY's management. The President of OLIN shall appoint two members to represent OLIN and the President of ARCH shall appoint two members to represent ARCH. The sole purpose of MAB shall be to resolve any dispute over which the Representatives failed to resolve. The MAB members shall be persons other than the Representatives. The MAB shall meet at Norwalk, Connecticut or otherwise confer to resolve the dispute by good faith negotiations, which may include presentations by the Representatives or others. 13.2 ARBITRATION - ------------------ In the event the PARTIES are unable to resolve their disputes within ninety (90) days after the establishment of a MAB, upon election of either PARTY, such disputes, shall be solely and finally settled by three arbitrators in accordance with the Commercial Arbitration Rules of the AAA (the "Arbitration Rules"). The PARTY electing arbitration shall so notify the other PARTY in writing in accordance with the Arbitration Rules, and such notice shall be accompanied by the name of the arbitrator selected by the PARTY serving the notice. The second arbitrator shall be chosen by the other PARTY, and a neutral arbitrator shall be chosen as the third arbitrator by the two arbitrators so selected. If a PARTY fails to select an arbitrator or to advise the other PARTY of its selection within thirty (30) days after receipt by such a PARTY of the notice of the intent to arbitrate, the second arbitrator shall be selected by the AAA. If the third arbitrator shall not have been selected within thirty (30) days after the selection of the second arbitrator, the appointment shall be made by the AAA. All such proceedings shall be conducted in New York, New York. The arbitrators shall make detailed findings of fact and law in writing in support of the decision of the arbitrator panel, and is empowered to award reimbursement of attorneys' fees and other costs of arbitration to the prevailing PARTY, in such manner as the arbitrator panel shall deem appropriate. The provisions of this Section 13.2 shall not be deemed to preclude any PARTY hereto from seeking preliminary injunctive relief to protect or enforce its rights hereunder, or to prohibit any court from making preliminary findings of fact in connection with granting or denying such preliminary injunctive relief, or to preclude any PARTY hereto from seeking permanent injunctive or other equitable relief after and in accordance with the decision of the arbitrator panel. Whether any claim or controversy is arbitrable or litigable shall be determined solely by the arbitrator panel pursuant to the provisions of this Section 13.2. Any monetary award of the arbitrators panel shall include interest from the date of any breach or any violation of this Agreement. The arbitrators shall fix an appropriate rate of interest from the date of the breach or other violation to the date when the award is paid in full. The parties agree that judgment on the arbitration award may be entered in any court having jurisdiction over the parties or their assets. 13.3 CONTINUING OBLIGATIONS - ----------------------------- It is expressly agreed that the failure of the parties to resolve a dispute on any issue to be resolved hereunder shall not relieve either PARTY from any obligation set forth in this Agreement. In addition, notwithstanding the pendency of any such dispute, neither PARTY will be excused of its obligations hereunder to cooperate with the other to effectuate the purposes of this Agreement. Page 16 CONFIDENTIAL DRAFT DEC. 29, 1998 13.4 NO THIRD PARTY BENEFICIARIES - ----------------------------------- This AGREEMENT is made for the exclusive benefit of OLIN and ARCH, and not for the benefit of any third party. 13.5 COUNTERPARTS - ------------------- This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of this shall constitute one and the same instrument IN WITNESS WHEREOF the PARTIES hereto have caused this AGREEMENT to be executed in duplicate as of the date first written above. OLIN CORPORATION ARCH CHEMICALS, INC. Name__________________________ Name__________________________ Title_________________________ Title_________________________ Date__________________________ Date__________________________ Page 17 EX-10.10 15 INFORMATION TECHNOLOGY SERVICES AGREEMENT EXHIBIT 10.10 INFORMATION TECHNOLOGY SERVICES AGREEMENT This Agreement is dated as of the 1st day of February, 1999, by and between Olin Corporation, a Virginia corporation, having its principal place of business at 501 Merritt 7, Norwalk, Connecticut 06851 ("OLIN") and Arch Chemicals, Inc., a Virginia corporation, having its principal place of business at 501 Merritt 7, Norwalk, Connecticut 06851 ("ARCH"). In consideration of the payments to be made and services to be performed hereunder, the parties agree as follows: ARTICLE 1 PRELIMINARY STATEMENT This Agreement is being made and entered into with reference to the following facts: (a) OLIN and ARCH have entered into a Distribution Agreement dated as of February __, 1999 (the "Distribution Agreement"), pursuant to which OLIN has agreed to transfer to Arch certain assets and businesses constituting the Arch Assets and the Arch Business, respectively (each as defined in the Distribution Agreement). (b) Included in the Arch Business being transferred from OLIN to ARCH will be certain personnel and other assets previously used by Olin to provide information technology ("IT") services to itself. (c) Following the Distribution (as defined in the Distribution Agreement), OLIN desires that ARCH provide certain IT services to OLIN and its subsidiaries, on the terms and conditions provided in this Agreement. (d) ARCH has agreed to provide these IT services and to do such other acts and things as described in this Agreement for a minimum two (2) year period, and thereafter as agreed by the parties upon the terms and conditions set forth below. (e) OLIN has agreed that ARCH will have access to the OLIN mainframe and certain other OLIN assets described herein for the term of this Agreement. The following is a list of Schedules attached to and forming a part of this Agreement: Schedule A - Statements of Work and Services Schedule A1: Relationship Management Schedule A2: Enterprise Operations Center Schedule A3: Desktop/End-User device Services Schedule A4: Help Desk Devices Schedule A5: SAP Managed Operations Schedule A6: Application Services Schedule A7: Data Communication Services Schedule A8: Voice Communication Services Schedule A9: Year 2000 Program Management Schedule A10: Internet / Intranet Services Schedule A11: Business and Technical Information Services Schedule B - Plan To Define Performance Standards Schedule C - Pricing/Fees Schedule D - Disaster Recovery Schedule E - Personnel Matters - East Alton, Bethalto and Norwalk IT Employees - Designation of Account Manager Schedule G - Asset Allocations, Shared Contracts Schedule G1: Olin & Arch Data Center Physical Assets Schedule G2: Division of Olin & Arch Software Contracts Schedule G3: Division of Olin & Arch Norwalk IT Assets Schedule G4: Division of Olin & Arch Charleston IT Assets Schedule G5: Division of Olin & Arch leases Schedule G6: Olin & Arch Shared Contracts Schedule X - Technical Reference Documents Schedule X1: System Technology Schedule X2: Technical Architecture Standards ARTICLE 2 TERM The Initial Term of this Agreement shall begin on the Distribution Date (as defined in the Distribution Agreement) and continue for a two-year period through January 31, 2001 (the "Initial Term"), except with respect to certain Services related to Shared Contracts, for which the Initial Term will be as stated in Section 16.2. Thereafter, this Agreement shall automatically renew for successive one-year renewal terms until terminated as provided herein. In the event that either OLIN or ARCH desires to terminate this Agreement effective as of the expiration of the Initial Term, or at the end of any one year renewal term thereafter, such party shall notify the other not less than twelve (12) months prior to the expiration of the Initial Term or any renewal term thereafter, as applicable. - -------------------------------------------------------------------------------- 2 ARTICLE 3 SERVICES SECTION 3.1 SERVICES TO BE PROVIDED During the term of this Agreement, ARCH will perform, provide, manage and administer the services and functions described in the Statements of Work, Schedule A (as such may be modified hereunder, the "Services") in accordance with the terms set forth in this Agreement. SECTION 3.2 STANDARD OF SERVICE ARCH will use all reasonable and customary measures to provide the Services at all times in a cost-effective, high-quality fashion and on a basis consistent with the basis on which it provides such Services internally. Initially, the Services will be provided on substantially the same basis and manner as that on which IT services were provided by OLIN internally prior to the Distribution. Thereafter, ARCH and OLIN shall work together to develop agreed upon service standards and implementation schedules. SECTION 3.3 NON-MATERIAL CHANGES IN SERVICES ARCH may make such non-material changes to the day-to-day delivery of Services as it deems advisable in the ordinary course of business, to the extent such changes do not require approval as set forth in Section 3.4 below or otherwise adversely impact the Services, or reduce the level of Services delivered. Any change in Services which (i) is described in the first paragraph of Section 3.4, or (ii) represents a variance from or a change in the description of the Service contained in the Statement of Work shall require approval as set forth in Section 3.4 below. SECTION 3.4 CHANGES TO SERVICES REQUIRING APPROVAL All changes to computing systems, application software or application documents that would materially alter the functionality of the affected systems or increase the cost of Services to OLIN over the budgeted amounts shall be controlled using a formal contract change control process to be developed jointly by OLIN and ARCH within sixty (60) days after the Distribution Date. The parties will establish a Contract Change Control Board to implement the change control process within thirty (30) days after the Distribution Date, consisting of three (3) representatives appointed by OLIN and three (3) representatives appointed by ARCH. The party proposing a change will document it in writing, provide technical and cost-justification for the change, and specify a desired implementation date. ARCH and OLIN will assess the impact of the proposed change, considering resources required, interfaces to other systems and other planned and in process changes. The completed analysis will be presented to the Contract Change Control Board for approval. No changes will be implemented without the approval of the Contract Change Control Board. The Contract Change Control Board may - -------------------------------------------------------------------------------- 3 determine (or if so directed by the Management Committee or the Executive Committee, shall determine) that significant changes require: 1) additional approval by the Management Committee, 2) additional approval by the Executive Committee and/or 3) a written agreement setting forth applicable specifications, schedules, resources to be utilized, responsibility of both parties and definition of successful completion. SECTION 3.5 ADDITIONAL OR SUBSTITUTE SERVICES In the event that OLIN desires that new Services be added to or substituted for existing Services, OLIN shall make such proposed change request to ARCH, including as much information and detail as reasonably available to OLIN. ARCH will respond to such change request within thirty (30) days with a proposed solution that identifies: 1) the proposed scope, 2) the expected delivery time frame, 3) the implementation approach and logistics, and 4) pricing implications, if any. If in the opinion of ARCH, the change request could be implemented in a more cost-effective manner than that described in the proposed solution or should, for any reason, be implemented in a different manner than that described in the proposed solution, ARCH will advise OLIN in writing of its recommendations and shall, if requested by OLIN, prepare a proposed solution which reflects its recommendations. ARTICLE 4 HUMAN RESOURCES 4.1 GENERAL It is understood and agreed by ARCH and OLIN that all persons employed, directly or indirectly, by ARCH to perform Services for OLIN shall be employees or agents of ARCH exclusively, for all purposes and at no time shall be authorized to act as agents, servants or employees of OLIN. ARCH shall be solely responsible for the payment of compensation, including provisions for employment taxes, workers' compensation and any similar taxes associated with employment of ARCH's personnel. ARCH shall take appropriate measures to ensure that its employees who perform Services under this Agreement are reasonably competent to do so. OLIN and ARCH agree that personnel allocations will be made as provided in Schedule E. SECTION 4.2 ACCOUNT TEAM ARCH shall appoint an individual ARCH employee who from the Distribution Date shall be in charge of implementing and managing delivery of the Services (the "Account Manager"). The - -------------------------------------------------------------------------------- 4 initial appointee shall be the person identified on Schedule E. ARCH's subsequent appointment of any Account Manager shall be subject to OLIN's consent, not to be unreasonably withheld. In order to facilitate the orderly provision of Services hereunder, ARCH agrees to discuss with OLIN any material change to be made by ARCH in staffing levels or personnel assignments, which change will have a material impact on ARCH's delivery of Services hereunder, prior to ARCH's instituting such change. SECTION 4.3 NON-SOLICITATION OF PERSONNEL During the term of this Agreement and for a period of twelve (12) months following its termination, neither ARCH nor OLIN, except as provided in this Section 4.3 below, on Schedule E or as otherwise agreed to by the parties in writing, shall directly or indirectly solicit, recruit, employ, or contract for the services of any employee of the other who was assigned at any time to perform or receive Services pursuant to this Agreement, provided however, that the foregoing non-solicitation provision shall not apply as of and after the termination date of this Agreement to ARCH employees who are dedicated on a 85% or more time basis to providing Services exclusively to OLIN pursuant to this Agreement immediately prior to such termination date. Notwithstanding the preceding paragraph, ARCH agrees that in the event that OLIN serves notice under Article 2 hereof that it is terminating this Agreement, in whole or in part as to specific Services as of January 31, 2001 (a "Year-Two Termination Notice"), then OLIN shall be permitted hereunder to contact, solicit and recruit Available ARCH Employees (as defined below), to become employees of OLIN, for employment by OLIN commencing in February 2001. The parties shall cooperate with each other regarding such solicitation, so as to permit ARCH to continue to effectively render the Services hereunder through the termination date, and to facilitate a smooth transition for OLIN. "Available ARCH Employees" shall mean those ARCH employees who were directly involved in providing the terminated Service(s) to OLIN under this Agreement, but excluding any ARCH employee who may have been incidentally involved in provision of such Service, but such involvement constituted less than fifteen percent (15%) of such person's overall time. Within thirty (30) days after ARCH receives a Year-Two Termination Notice from OLIN, ARCH shall provide OLIN with a list of Available ARCH Employees. The Management Committee shall meet within fifteen (15) days thereafter to resolve any disputes regarding whether such list is compete and accurate. In the event that the Management Committee is unable to reach agreement as to a final list of Available ARCH Employees, the dispute shall be referred to the Executive Committee for resolution. - -------------------------------------------------------------------------------- 5 ARTICLE 5 SYSTEM TECHNOLOGY SECTION 5.1 SYSTEM TECHNOLOGY, TECHNICAL (INFRASTRUCTURE) ARCHITECTURE ARCH shall be responsible for providing the system technology, as described on Schedule X, necessary to support OLIN's requirements for the Services. ARCH shall be responsible for ongoing development of technical architecture standards, which will be reviewed and adopted by OLIN and ARCH from time to time as appropriate and modified as mutually agreed. The technical architecture standards last revised April 18, 1997 are as described on Schedule X. Within six months after the Distribution Date, ARCH will complete a process with OLIN to update these standards, which updated standards will then be submitted to the Contract Change Control Board for approval. SECTION 5.2 APPLICATION ARCHITECTURE OLIN's application architecture shall at all times be developed and maintained by OLIN and shall be OLIN's responsibility. OLIN's application architecture shall govern the technological direction and specifications developed by OLIN in consultation with ARCH. SECTION 5.3 CURRENT CONFIGURATION OLIN's system configuration as of the Distribution Date is detailed in Schedule X. SECTION 5.4 CHANGES IN TECHNOLOGY ARCH may, at its discretion, and upon reasonable notice to OLIN, make changes to the operating environment for the Services. No material change to the operating environment shall be implemented by ARCH until OLIN has had a reasonable opportunity to adapt its operations to accommodate such change. Any change pursuant to this Section shall proceed through the Contract Change Control Board approval process in Section 3.4. OLIN may object to a proposed operating environment change if: 1) the proposed change will have a material adverse effect on the operating environment or its interfaces, 2) in the reasonable opinion of OLIN, the proposed change will result in a net increase of OLIN's information technology costs related to the Services or 3) the proposed change is not consistent with OLIN's applications environment or system architecture. - -------------------------------------------------------------------------------- 6 ARTICLE 6 SECURITY AND ACCESS SECTION 6.1 SECURITY MEASURES AND PROCEDURES ARCH shall provide physical and logical protection for OLIN hardware, software, applications and data that meet or exceed physical and logical protection practices observed by OLIN prior to the Distribution Date. This may include, without limitation, the use of: 1) electronic or physical locks, 2) system identifiers and passwords, 3) database locks and passwords, and 4) periodic audit security checks. SECTION 6.2 ACCESS BY OLIN ARCH shall provide OLIN with access, subject to ARCH's reasonable access security requirements, seven days a week, 24 hours a day to ARCH data centers and other locations as appropriate for the purposes of inspection and monitoring access and use of OLIN data and maintaining OLIN systems. ARCH shall provide such assistance which may be reasonably required in connection with any such inspection and monitoring. ARTICLE 7 BACKUP AND DISASTER RECOVERY SECTION 7.1 GENERAL ARCH shall establish and maintain safeguards, including file backup, off-site storage and contingency site protection, against the theft, destruction, loss or alteration of OLIN's data, which safeguards are no less rigorous than those maintained by OLIN prior to the Distribution Date. SECTION 7.2 BACKUP AND RECOVERY PROCEDURES OLIN shall, at OLIN's expense, establish such back-up security for data and keep back-up data and data files as is reasonably required by ARCH to assist it in safeguarding OLIN data. ARCH shall assist OLIN in establishing such other back-up procedures as reasonably required from time to time by OLIN. As long as ARCH follows the backup procedures reasonably established or agreed by OLIN, OLIN (and not ARCH) shall be responsible for any loss or liability incurred by it from failing to implement additional or different backup procedures. As improvements in data security, transmission security, or other technology which involve security evolve, ARCH and OLIN agree to work together to select and implement appropriate additional or substitute security measures. - -------------------------------------------------------------------------------- 7 SECTION 7.3 DISASTER RECOVERY PROCEDURES Schedule D sets forth the procedures currently in place to be followed with respect to the continued provision of the Services in the event that ARCH facilities are unavailable for use to provide Services to OLIN because such facilities have been destroyed, damaged or are otherwise not available for use to such an extent that ARCH is unable to provide any or all of the Services. In the event the Services are provided from a disaster recovery site for more than sixty (60) days, OLIN may terminate this Agreement upon notice to ARCH without regard to the provisions of Article 20. ARCH shall (1) test the Disaster Recovery procedures within 120 days of the Distribution Date and at least once every calendar year and certify to OLIN that the Disaster Recovery procedures are operational, (2) consult with OLIN regarding the priority to be given to the Services in the event of any such disaster, and (3) not be excused from implementing the Disaster Recovery procedures as a result of the events described in Section 18.4. SECTION 7.4 CONTINGENCY SITE CHARGES OLIN shall reimburse ARCH in the event of a disaster for OLIN's pro rata share of actual costs and expenses incurred by ARCH in connection with providing access to its disaster recovery facility, including, without limitation, fees for actual usage incurred thereunder; provided, however, OLIN shall not be responsible for the foregoing costs or expenses to the extent the unanticipated interruption of ARCH data processing capability is caused by the gross negligence or willful misconduct of ARCH. SECTION 7.5 MODIFIED OR ADDITIONAL BACKUP AND DISASTER RECOVERY PROCEDURES ARCH and OLIN contemplate that development of mutually agreed modifications to the backup and recovery procedures and to the Disaster Recovery procedures will be part of the Services, and as described in the Statement of Work. In addition, ARCH may unilaterally modify the Disaster Recovery procedures at any time as it deems necessary; provided, however, that such a modification shall not materially adversely affect ARCH's ability to restore the Services, and further provided that ARCH shall notify OLIN of any material such modification in the Disaster Recovery procedures prior to implementation. ARTICLE 8 PERFORMANCE STANDARDS SECTION 8.1 ARCH COVENANTS ARCH covenants that: 1) all Services rendered hereunder will be performed in a professional manner, conforming in all material respects to the provisions hereof, and at a minimum shall at - -------------------------------------------------------------------------------- 8 all times be provided at or above the levels provided by OLIN internally prior to the Distribution Date and 2) ARCH will reperform any Services at no additional charge where it is clearly demonstrated that erroneous results were created through some fault of ARCH during the performance of the Services. SECTION 8.2 SERVICE LEVEL REQUIREMENTS During 1999, ARCH and OLIN shall agree as to a set of Performance Standards, according to the plan set forth in Schedule B. These Performance Standards will be tested in calendar year 2000 (such 2000 tests to be informational only), and measurement and monitoring tools and procedures to measure and report ARCH's performance of the Services against such agreed Performance Standards. Such measurements and monitoring shall permit reporting at a level of detail sufficient to verify compliance with the Performance Standards, and shall be subject to audit by OLIN. All such reporting shall be prepared and delivered to OLIN at the monthly meetings described in Section 11.2 of this Agreement. ARCH shall provide OLIN and OLIN's auditors with information and access to all such tools and procedures upon request for purposes of verification. SECTION 8.3 REVISION OF STANDARDS After development and implementation of the Performance Standards for calendar year 2000, the OLIN Contract Manager and the ARCH Account Manager will meet periodically, but no less frequently than annually, to review the then current Performance Standards and make such adjustments thereto as may be reasonably required to reflect applicable changes in the Services described in Section 8.2 above. SECTION 8.4 OLIN SATISFACTION ARCH shall develop, in cooperation with OLIN, a quality measurement of OLIN user satisfaction. Within 360 days after the Distribution Date, ARCH shall conduct a survey and provide a report to identify any part of the Services that needs to be improved, and subsequently to follow up on any user concerns. The survey will be repeated at intervals reasonably agreeable to both OLIN and ARCH but the interval between surveys will not exceed fifteen (15) months. SECTION 8.5 PERFORMANCE DOCUMENTATION ARCH will provide OLIN with such performance documentation as currently exists and other information as may be reasonably requested by the OLIN from time to time in order to ensure the correct and efficient utilization of the Services provided by ARCH. - -------------------------------------------------------------------------------- 9 ARTICLE 9 OLIN RESPONSIBILITIES SECTION 9.1 OLIN CONTRACT MANAGER OLIN shall designate prior to commencement of the Services under this Agreement, a qualified trained person as Contract Manager. Such designated person, and any subsequent designee as Contract Manager, shall be subject to ARCH's consent, not to be unreasonably withheld. The Contract Manager shall be responsible for monitoring and managing this Agreement and shall have the authority to act for OLIN hereunder, except with respect to matters within the scope of the Management Committee or the Executive Committee (refer to Schedule A1 for more details). The Olin Contract Manager will be responsible for providing information, data decisions, and report approvals to ARCH personnel within fifteen (15) days after receipt or notification thereof from ARCH, unless OLIN and ARCH agree to an extended response date. SECTION 9.2 PERSONNEL, FACILITIES, SERVICES AND ITEMS TO BE PROVIDED BY OLIN OLIN shall provide, at no charge to ARCH, and in a timely manner, reasonable cooperation and assistance during this Agreement, including: 1) providing work space and physical facilities and support to ARCH personnel while working at OLIN's sites, 2) providing the applicable hardware, operating system software, development tools, local area networks and database software, and the like, 3) providing physical site security, 4) providing project personnel who are familiar with the Services to approve all submissions made by ARCH in a timely manner or as specified herein, and participate in all other aspects of the Services as necessary, 5) providing appropriate assigned space in the computer rooms of the OLIN East Alton Administration Building and the Charleston facilities, 6) providing such other information and support relating to the Services as are reasonably necessary, and 7) such other specific facilities, personnel, services and other items to be provided by OLIN as are specified in the Statement of Work, Schedule A. OLIN will be responsible for the availability and performance of such facilities, personnel, services and other items. OLIN shall provide ARCH at OLIN's East Alton Brass/Winchester Administration Building with dedicated space in which to store backup tapes from the ARCH Bethalto Data Center, at no cost to ARCH. OLIN acknowledges and agrees that such tapes shall contain both OLIN and ARCH data on a segregated basis. OLIN shall be responsible for providing security and a proper environment for such tapes at agreed levels. OLIN shall be responsible for providing building services and facilities services to the ARCH Bethalto Data Center (e.g. fire protection, security, ---- shipping and receiving, mail), at no cost to ARCH. Such services shall be provided by OLIN on a basis substantially consistent with the basis on which they are provided to OLIN's East Alton facilities. - -------------------------------------------------------------------------------- 10 SECTION 9.3 ACCESS TO OLIN FACILITIES OLIN shall provide ARCH with 7 day/24 hour access to all OLIN facilities at which ARCH is providing Services, subject to OLIN's reasonable security requirements. SECTION 9.4 NON-PERFORMANCE BY OLIN ARCH's obligations are conditional upon the fulfillment by OLIN of its responsibilities set out in this Agreement. Delay or failure caused by the OLIN to fulfill its responsibilities may result in an adjustment to the pricing and performance of Services and shall release ARCH from its obligations hereunder to the extent that ARCH is affected by such OLIN delay or failure. ARTICLE 10 PRICING AND PAYMENTS SECTION 10.1 PRICING/FEES FOR SERVICES OLIN will pay to ARCH the charges and fees for Services (the "Pricing/Fees") in accordance with the provisions of Schedule C. The Pricing/Fees for 1999 is set forth on Schedule C. In the event that OLIN and ARCH are unable to agree as to a mutually acceptable pricing methodology for calendar year 2000, then the pricing methodology and allocation formulas used in 1999 shall be used in 2000 as well. Any modification to Pricing/Fees for years after 2000 shall be as mutually agreed by the parties as a part of the budgeting process described below. On or before August 1 of each year of this Agreement, ARCH will submit to OLIN a proposed budget of Pricing/Fees for the following calendar year, together with (unless a termination notice is then in effect) a budget forecast for the next successive calendar year thereafter. OLIN and ARCH will meet and begin reviewing the proposed budget for Pricing/Fees for the following calendar year no later than by the end of August of each year, and shall work together on such budget for Pricing/Fees so as to reach mutual agreement no later than November 30 for the final budget for Pricing/Fees for the following calendar year. The budgets proposed by ARCH for the following calendar year shall be generally prepared on a basis consistent with the budget forecast for such year previously submitted by ARCH to OLIN, subject to differences necessitated by changes in the OLIN IT environment or OLIN business, changes made during the prior year to the Services hereunder or changes in information technology services and/or equipment, hardware or software generally. All capital expenditures made by ARCH on behalf of OLIN as part of the Services hereunder shall be subject to following the OLIN corporate-wide internal approval process currently in effect, or as OLIN may modify it in the future upon notice to ARCH. - -------------------------------------------------------------------------------- 11 SECTION 10.2 EXPENSES Travel expenses for ARCH or its designees for normal business and for attending training courses and seminars will not be reimbursed to ARCH by OLIN. Normal business includes, but is not limited to, attending committee meetings; attending regularly scheduled OLIN service review meetings to review Services level objectives and performance results; necessary travel for coordinating, managing, planning, scheduling, and reviewing data center activities and problem resolution; and employee travel related to discussions initiated by or at the request of ARCH. In addition, ARCH will provide on-site support on a day-to-day basis which will minimize travel requirements. In the event that additional travel is requested by OLIN in conjunction with the Services, all normal travel expenses incurred by ARCH to support these activities will be reimbursed by OLIN. ARCH will notify OLIN in advance before incurring travel expenses for which it expects reimbursement. Normal travel expenses will include transportation expenses to and from the required destination, necessary local transportation, hotels and standard per diem allowances in accordance with the then current ARCH reimbursement policy. Unless otherwise authorized by OLIN, reimbursed domestic travel will be only for tourist or coach class, with such discounts as are available at booking. SECTION 10.3 TAXES ARCH is responsible for the payment of all federal taxes (except to the extent OLIN is required to withhold federal taxes from ARCH), state and local taxes or contributions imposed or required under unemployment insurance, social security and income tax laws, with respect to Services performed by ARCH personnel in the United States and all taxes associated with the performance of Services for OLIN in any foreign country to the extent applicable. To the extent not included in the price ARCH charges for Services, OLIN shall pay to ARCH the amount of any taxes or charges set forth in (a) and (b) below imposed now or in the future by any Governmental Authority including any increase in any such tax or charge imposed on ARCH after the Distribution Date: (a) Any applicable sales, use, gross receipts (other than gross receipt taxes which are in lieu of income taxes), value added or similar tax that is imposed as a result of, or measured by, any sale or Service rendered hereunder unless covered by an exemption certificate; and (b) Any other governmental taxes, duties, and/or charges of any kind, excluding any income or franchise taxes imposed on ARCH, which ARCH is required to pay with respect to any sale or Service rendered hereunder. 12 SECTION 10.4 INVOICING AND PAYMENT OLIN shall make monthly payments in advance to ARCH in an amount equal to one-twelfth (1/12) of the annual agreed budgeted amount for Services (the "Budget Amount") as set forth in Schedule C, on or before the last business day of the preceding calendar month during this Agreement, except that the first such monthly payment due hereunder shall be paid immediately following the Distribution Date. Within thirty (30) days after the end of each calendar year, ARCH will present OLIN with a final accounting of the actual costs for Services for which OLIN previously has made such monthly payments for the Budget Amount, and within fifteen (15) days thereafter, OLIN shall make a payment to ARCH (if actual costs are in excess of the Budget Amount) or shall receive a payment from ARCH (if actual costs are below the Budget Amount), in an amount equal to one-half (1/2) of the net variance from the Budget Amount. Notwithstanding the foregoing, to the extent that specific Services can be identified as being at variance from the Budget Amount in a material amount based on actual usage allocable to OLIN or to ARCH, then an adjustment shall be made quarterly in the Budget Amount to reflect such variance. ARCH shall render an invoice monthly for any expenses and additional Services not included in the Budget Amount to OLIN at OLIN's principal place of business or at such other address designated by OLIN. All charges will be invoiced at the end of the calendar month in which the charges are incurred. Invoices are payable by OLIN to ARCH at its principal place of business, within fifteen (15) days of receipt of invoices. Each invoice will include sufficient information to enable OLIN to reasonably ascertain and substantiate the appropriateness of the charges. All payments due hereunder shall be made by electronic funds transfer. SECTION 10.5 LATE CHARGES Any undisputed amount owed under this Agreement by OLIN , which is not paid on or before the date such amount is due, and any disputed amount ultimately determined under this Agreement to be owed to ARCH, shall bear interest commencing upon the original due date and continuing until paid at two percent (2%) above the "prime rate" as published in the Wall Street Journal under the ------------------- title "Money Rates," and defined therein as being the base rate on corporate loans at large money center commercial banks (or if no longer published, an equivalent rate agreed by OLIN and ARCH). In no event shall the rate charged exceed the maximum lawful rate of interest permitted by applicable federal or state law. SECTION 10.6 RECORDKEEPING ARCH shall maintain complete and accurate accounting records to support and document all charges and fees payable by OLIN. Such records shall be retained for a period of at least four (4) years after the date of the last applicable invoice. ARCH shall provide OLIN with such 13 documentation about each invoice as may be reasonably requested by OLIN to verify that ARCH's charges to OLIN are accurate, correct, and valid in accordance with the provisions of this Agreement. ARTICLE 11 MANAGEMENT AND CONTROLS SECTION 11.1 REPORTING ARCH will provide OLIN with monthly status reports on projects and system operations in accordance with current practices. The content and format of these reports will be recommended by the Management Committee and approved by the Executive Committee. In addition, ARCH will provide OLIN with such other documentation and information as may be reasonably requested by OLIN from time to time in order to verify that ARCH's performance of Services is in compliance with the terms and conditions of this Agreement. SECTION 11.2 MEETINGS OF CONTRACT MANAGER AND ACCOUNT MANAGER The OLIN Contract Manager and ARCH Account Manager will meet on a monthly basis, or more frequently as required, to review ARCH's performance in the prior month regarding, but not limited to, service level goals and attainment, OLIN satisfaction, workload and work effort, and billing. These meetings shall be conducted within ten (10) business days following the close of the prior month, unless both OLIN and ARCH agree to a different schedule. SECTION 11.3 MANAGEMENT AND EXECUTIVE COMMITTEES OLIN and ARCH shall establish and maintain a Management Committee and Executive Committee throughout the term of this Agreement. The Management Committee shall consist of the Contract Manager from OLIN and the Account Manager from ARCH, with advisory members from each company as deemed appropriate. The responsibilities of the Management Committee include the following: 1) ensure sufficient and continued communications between OLIN and ARCH, 2) review planned system changes, 3) provide advice on the use of existing and new technology, 4) attempt to resolve disputes by mutual agreement, with escalation to the Executive Committee as necessary, 5) review price changes and modifications to Services to this Agreement, 6) review and revise OLIN and ARCH responsibilities, 7) review and act upon performance reports, including service level reports, 8) review and analyze workload trends and variances from plan, and 9) undertake such other responsibilities as OLIN and ARCH agree upon from time to time. 14 The Executive Committee shall consist of the OLIN Information Technology Executive Advisory Committee and the Vice President - Information Technology of ARCH, with advisory members from each company as deemed appropriate. The responsibilities of the Executive Committee include the following: 1) perform an annual review of OLIN business planning initiatives and expected changes as they relate to the Services provided by ARCH, 2) perform an annual review of ARCH plans to support OLIN's needs for Services, 3) review quarterly the results of the Management Committee meetings and review annually performance evaluation reports, 4) attempt to resolve by mutual agreement any disputes escalated by the Management Committee, and 5) undertake such other responsibilities as OLIN and ARCH agree upon from time to time. SECTION 11.4 MANAGEMENT COMMITTEE AND EXECUTIVE COMMITTEE MEETINGS The Management Committee will meet on a quarterly basis, or as otherwise may be agreed by OLIN and ARCH, to review ARCH's performance in the prior quarter regarding, but not limited to, service level goals and attainment, OLIN satisfaction, workload and work effort, and billing. These meetings shall be conducted within fifteen (15) business days following the close of the prior quarter, unless both OLIN and ARCH agree to a different schedule. The Executive Committee will meet on a quarterly basis, or otherwise as may be agreed by OLIN and ARCH, to review the results of the Management Committee meeting and consider such other matters as the Executive Committee deems appropriate. These meetings shall be conducted within thirty (30) business days following the close of the prior quarter, unless both OLIN and ARCH agree to a different schedule. ARTICLE 12 DISPUTE RESOLUTION SECTION 12.1 GUIDING PRINCIPLES ARCH and OLIN agree to utilize all reasonable efforts to resolve any dispute, whether arising during the term of this Agreement or at any time after the expiration or termination of this Agreement, which touches upon the validity, construction, meaning, performance or effect of this Agreement or the rights and liabilities of the parties, promptly and in an amiable manner by negotiations between the parties. SECTION 12.2 PROBLEM ESCALATION PROCEDURES Either party may refer any dispute to the Management Committee. The Management Committee shall meet as soon as is reasonably possible after a dispute is referred to it, giving due regard to the nature and impact of the issue under consideration. 15 If a dispute cannot be resolved by the Management Committee within a time period that is reasonably satisfactory to the party raising the issue under consideration, the Management Committee, at the request of either party, shall promptly refer the dispute to the Executive Committee. The Executive Committee shall meet as soon as is reasonably possible after a dispute is referred to it, giving due regard to the nature and impact of the issue under consideration. If a dispute cannot be resolved by the Executive Committee within a time period that is reasonably satisfactory to the party raising the issue under consideration, the Executive Committee, at the request of either party, shall promptly submit the dispute for arbitration as provided in Section 12.3. SECTION 12.3 ARBITRATION The parties stipulate and agree that if they are unable to resolve any controversy arising under this Agreement then such controversy shall be submitted at the election of either party to mandatory and binding arbitration in lieu of litigation and judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction in State of Connecticut. Such arbitration shall be held in Fairfield County, Connecticut and shall be conducted in accordance with the Rules of the American Arbitration Association then in effect. Every matter in the controversy shall be settled by a panel of three arbitrators, none of whom may be a director, officer, employee, representative or agent of either of the parties. Each party shall select one arbitrator and the two arbitrators so selected shall select a neutral arbitrator to serve as the third arbitrator. In the event court action is required to enforce this Agreement to arbitrate, the parties hereby consent to the exclusive jurisdiction of the courts of the State of Connecticut. This section shall be interpreted, construed and governed by and in accordance with the Rules of the American Arbitration Association. ARTICLE 13 AUDIT RIGHTS SECTION 13.1 AUDIT AREAS During the term of this Agreement, OLIN and its authorized agents and representatives shall have the right to conduct inspection and/or audits of the Services provided by ARCH, including observing work performance and reviewing ARCH's records, during normal business hours upon reasonable notice to ARCH, at OLIN's expense, to verify that ARCH is exercising reasonable procedures in compliance with the requirements of this Agreement, to verify the integrity of the OLIN data, to examine the systems that support and transmit OLIN data, and to examine ARCH's conformance with this Agreement and performance of the Services hereunder, including, to the extent applicable to the Services and to the pricing for such 16 Services, 1) the practices and procedures, 2) the systems, 3) the general controls and security practices and procedures, and 4) the disaster recovery and back-up procedures. SECTION 13.2 ACCESS For the purposes of such audits, ARCH will provide to OLIN (and its designees) access to the part of any facility at which ARCH is providing the Services, to ARCH personnel and to data and records relating to the Services. ARCH will provide reasonable assistance and will cooperate reasonably with OLIN in connection with audit functions and with regard to examinations by regulatory authorities. OLIN auditors shall comply with ARCH's reasonable security measures. In the conduct of such inspections or audits, OLIN and its authorized agents and representatives will not be entitled to review any confidential or proprietary information of ARCH or any third party and may not interfere with the ability of ARCH to perform the Services hereunder. SECTION 13.3 INSPECTIONS OR AUDIT NOT A WAIVER No failure of OLIN during the progress of the Services to discover Services not in accordance with this Agreement shall be deemed an acceptance thereof, nor a waiver of defects therein; and no payment shall be construed to be an acceptance of Services which are not in accordance with this Agreement. ARTICLE 14 CONFIDENTIALITY SECTION 14.1 CONFIDENTIAL INFORMATION "Confidential Information" shall mean: 1) all information marked confidential, restricted or proprietary by either party; 2) OLIN's client lists, OLIN information, account information, and information regarding business planning and operations of OLIN and OLIN's administrative, financial or marketing activities; or 3) a party's proprietary intellectual property, such as proprietary software, methodologies, tools, specifications, drawings, sketches, models, samples, records, documentation, works of authorship or creative works, or data which has been originated or developed by such party's personnel or by third parties under contract to develop same, or which has been purchased by such party. SECTION 14.2 OBLIGATIONS AS TO CONFIDENTIAL INFORMATION Without the prior written consent of the other party, no Confidential Information shall be used by the receiving party for any purpose other than performance of this Agreement, or disclosed by the receiving party to any third party, other than its agents or employees who are subject to 17 non-use and confidentiality obligations consistent with those contained herein, except: 1) that in the event that either party receives a subpoena, request for documents, or other validly issued judicial or administrative process requiring the disclosure of Confidential Information of the other party, then such party may disclose such information to the extent required by such demand, provided that such party promptly notifies such other party of the receipt of process, and permits the other party a reasonable opportunity to respond to such process, 2) to the extent such Confidential Information is or becomes generally available to the public other than as a result of disclosure by the receiving party, 3) to the extent such Confidential Information becomes available to OLIN or ARCH from a third party who, to the best of OLIN's or ARCH's knowledge, received such information on a non-confidential basis, or 4) to the extent such Confidential Information had been independently developed by OLIN or ARCH at the time of receipt thereof from the other party. SECTION 14.3 STANDARD OF CARE The party receiving Confidential Information will maintain confidentiality by using the same degree of care that the receiving party takes to hold in confidence its own proprietary information of a similar nature, but in any event with no less of a degree of care than is reasonable for such information. Without limiting the general provisions of this Article, ARCH warrants that its employees involved in performing the Services shall be obligated in writing to ARCH to protect OLIN Confidential Information in a manner, at a minimum, consistent with the terms of this Agreement, and that to the extent that ARCH retains any third parties to provide Services under this Agreement, ARCH shall require such third parties to sign confidentiality agreements consistent with this Article 14. ARTICLE 15 OWNERSHIP AND LICENSES OF SOFTWARE AND INTANGIBLE ASSETS SECTION 15.1 DATA All OLIN data shall be and remain the property of OLIN or its suppliers or licensers. SECTION 15.2 APPLICATION SOFTWARE OLIN shall be and remain at all times the owner of all software to be owned by it exclusively after the Distribution, as set forth in Schedule G, or purchased by OLIN after the Distribution Date, that is being used to provide Services to it under this Agreement and of all software developed by ARCH as part of the Services for OLIN's exclusive use under or pursuant to this Agreement. OLIN grants to ARCH a worldwide, fully paid-up, non-exclusive right and license 18 to use, copy, maintain, modify, enhance, and create derivative works of, such software for the sole purpose of providing the Services pursuant to this Agreement. Such authorization includes without limitation, operation of the software for OLIN, maintenance, development, and modification as authorized by this Agreement (or otherwise in writing); and the duplication for operational, developmental, and archival purposes. This license does not give ARCH the right, and ARCH is not authorized, to sublicense such software, except if applicable, to ARCH subsidiaries for the sole purpose of their providing Services pursuant to this Agreement. Except as otherwise requested or approved by OLIN, ARCH shall cease all use of such OLIN owned software upon expiration or termination of this Agreement. ARCH shall be and remain at all times the owner of all software to be owned by it exclusively after the Distribution, as set forth in Schedule G, or purchased by it on its own behalf after the Distribution Date, provided however, that certain of such ARCH owned software (as specifically designated on Schedule G, and only to the extent permitted under the applicable software license), shall be used by both ARCH and OLIN during the term of this Agreement as part of the Services. OLIN's right to use of such software is restricted solely to usage as part of the Services being provided by ARCH to OLIN hereunder, and upon termination of this Agreement, OLIN shall have no further right to use such software. SECTION 15.3 NEW WORK Except as otherwise specified, new work will be owned as follows: 1) new work created by OLIN shall be the property of OLIN, 2) new work created by ARCH as "work for hire" for OLIN shall be the property of OLIN, and 3) ownership of new work owned jointly, created jointly or created for joint use by OLIN and ARCH and the rights and obligations related to the use thereof, shall be negotiated between the parties on a case-by-case basis. In the event that the parties cannot reach agreement, the matter will be submitted for dispute resolution in accordance with Article 12. ARTICLE 16 SHARED ASSETS AND CONTRACTS SECTION 16.1 FIXED ASSETS The parties agree that a fixed asset allocation as of the Distribution Date for OLIN owned IT assets, ARCH owned IT assets and shared IT assets shall be determined and agreed between ARCH and OLIN within ninety (90) days after the Distribution Date, on a basis consistent with the preliminary fixed asset allocation set forth on Schedule G, and that such assets shall be allocated in accordance with such agreed fixed asset allocation. Upon termination of this Agreement, ARCH will have a right of first refusal to purchase OLIN's portion of any shared IT assets at the book value of such OLIN portion. If ARCH does not elect to exercise such right of first refusal on or before termination of this Agreement, then OLIN may within sixty (60) days 19 thereafter, elect to purchase ARCH's portion of any shared IT assets at the book value of such ARCH portion. If OLIN does not so elect, then the shared IT asset shall be sold and the proceeds distributed to ARCH and OLIN in accordance with their share of the sold asset. SECTION 16.2 SHARED CONTRACTS As part of the Services, OLIN shall participate in the contracts listed on Schedule G6 (the "Shared Contracts") which were distributed to ARCH as part of the Distribution, and all associated costs will be allocated to OLIN in accordance with Schedule C. As to the Services identified on Schedule G6 as relating to a Shared Contract, ARCH and OLIN agree that the Initial Term for those Services shall be through the expiration date for the related Shared Contract, and that unless otherwise agreed by the parties, the Pricing/Fees for such Services during the Initial Term shall use the pricing methodology and allocation formulas used in 1999. Notwithstanding the foregoing, either OLIN or ARCH may elect to terminate the Services related to any such Shared Contract prior to the expiration date of such Shared Contract set forth on Schedule G6; provided, however, such party shall be responsible for all termination or cancellation charges imposed by the third party contractor and allocable to early termination or modification of such Shared Contract resulting from the party's election to terminate the related Services, prior to the Shared Contract's expiration date set forth on Schedule G6, and shall otherwise make the non-terminating party whole for any increased costs associated with such Shared Contract actually incurred by the non-terminating party as a result of the termination of the related Services. 16.3 NEW SHARED ASSETS OR CONTRACTS No new shared (i.e., intended for joint usage and shared cost allocations during the term of this Agreement) systems, assets or contractual obligations (or extensions to existing shared systems, assets or contracts), will be committed to or acquired by either party, except as mutually agreed between OLIN and ARCH in advance as to ownership, usage, Services to be provided and applicable Pricing/Fees. ARTICLE 17 INDEMNITIES SECTION 17.1 INDEMNIFICATION (a) ARCH shall indemnify, defend and hold harmless OLIN, including its affiliates, employees, representatives and agents (the "OLIN Indemnitees") from and against all claims, losses, damages, expenses, including attorney's fees and expenses ("Claims"), asserted by any ARCH subcontractor or by ARCH's or such subcontractor's employees (including their families 20 and estates) against the OLIN Indemnitees in connection with, or as a result of, ARCH's provision of Services under this Agreement except to the extent such Claims and Damages are caused by the gross negligence or willful misconduct of any of the OLIN Indemnitees. (b) OLIN shall indemnify, defend and hold harmless ARCH, including its affiliates, employees, representatives and agents (the "ARCH Indemnitees") from and against all Claims asserted by any third party (other than ARCH Subcontractors or ARCH's or such ARCH subcontractor's employees (including their families and estates) for which ARCH has indemnification obligations under Section 17.1(a) above), or by OLIN employees (including their families and estates), against the ARCH Indemnitees in connection with, or as a result of, ARCH's provision of Services under this Agreement unless such Claims and/or Damages are caused by the gross negligence or willful misconduct of any of the ARCH Indemnitees. (c) Each party shall indemnify, defend and hold harmless the other indemnitee group from and against all monetary fines, penalties or the like, imposed by a Governmental Authority against the party entitled to indemnification arising from a violation by the indemnifying party of applicable laws, rules, regulations, orders, or the like of any governmental authority. (d) In no event will an indemnitor be liable hereunder for punitive, special, indirect, consequential damages or lost profits or business interruption claimed by a third party. SECTION 17.2 INDEMNIFICATION PROCEDURES (a) In the event of any Claim for which a party is entitled to indemnification, the party seeking indemnification shall immediately notify in writing the indemnifying party of such Claim and shall fully cooperate with the indemnifying party in the defense of the Claim and, at the indemnifying party's cost, permit the indemnifying party's attorney(s), reasonable acceptable to the indemnified party, to handle and control the conduct and/or settlement of such Claim, including making personnel and records available for the defense of the Claim. (b) The indemnifying party shall keep the indemnified party reasonably informed regarding any claim, action or proceeding in which the indemnifying party is defending the indemnified party, and shall not enter into any settlement or compromise of such claim, action or proceeding affecting the indemnified party without the indemnified party's consent, unless such settlement or compromise contains a complete and unconditional release of the indemnified party. In no event shall the indemnifying party agree to a settlement which contains a non-monetary component without the consent of the indemnified party, which consent not to be unreasonably withheld. (c) The indemnification provisions of Section 17.1 are contingent upon the indemnified party promptly turning over the complete control of the claim and/or suit to the indemnifying party. 21 SECTION 17.3 SCOPE OF INDEMNIFICATION AS PERMITTED BY APPLICABLE LAW Nothing in this Article 17 shall be construed to violate directly or indirectly any applicable law prohibiting indemnification for the sole or partial negligence of the indemnitee. In the event any provision of this indemnity is contrary to applicable law, this indemnity shall not be void or unenforceable, but shall be enforced to, and only to, the fullest extent permitted by the applicable law. ARTICLE 18 LIABILITIES SECTION 18.1 LIMITATION OF LIABILITY ARCH's sole liability hereunder with respect to performance of Services shall be for a breach of its covenants in Section 8.1 above. In no event will either party's liability hereunder exceed the amounts payable hereunder as described in Pricing/Fees and Section 16.2 with respect to Shared Contracts. SECTION 18.2 CONSEQUENTIAL DAMAGES Notwithstanding anything to the contrary contained herein or at law and in equity, in no event shall a party be liable to the other party for punitive, special, indirect or consequential damages (including, without limitation, damages for loss of business profits, business interruption or any other loss) arising from or relating to any claim made under this Agreement or regarding the provision of or the failure to provide Service(s) hereunder, even if a party had been advised or was aware of the possibility of such damages. SECTION 18.3 MITIGATION OLIN and ARCH (as the case may be) shall use all reasonable efforts to mitigate the loss and damage (if any) incurred by it as a result any breach by the other party of that other party's obligations under this Agreement. SECTION 18.4 FORCE MAJEURE Both parties will be released from their obligations under this Agreement to the extent that circumstances beyond the control of either party prevent it from performing its obligations: 1) if and to the extent such default or delay is caused by fire, flood, earthquake, elements of nature or acts of God, riots, civil disorders, wars, rebellions or revolutions, governmental action, third-party strikes, lockouts, or labor difficulties, or any other similar cause beyond the reasonable control of such party and 2) provided such default or delay could not have been prevented by 22 reasonable precautions and cannot reasonably be circumvented by the non- performing party through the use of alternate sources, work around plans or other means. In such event, the non-performing party will be excused from any further performance or observance of the obligations so affected for as long as such circumstances prevail and such party continues to use commercially reasonable efforts to recommence performance or observance whenever and to whatever extent possible without delay. Any party so delayed in its performance will immediately notify the other by telephone (to be confirmed in writing within two (2) business days of the inception of such delay) and describe at a reasonable level of detail the circumstances causing such delay. If any of the above enumerated circumstances continues for more than thirty (30) days, the party affected by the other party's delay or inability to perform may elect to suspend performance under the Statement of Work, obtain the affected Services elsewhere and resume performance of the Statement of Work once the force majeure event ceases to exist, provided that ARCH may request an appropriate adjustment to the charges for any applicable Services to reflect any additional costs incurred as a result of the force majeure event. The schedule for any affected Statements of Work will be extended to reflect the delay caused by a force majeure event and an appropriate adjustment will be made to the charges thereunder. ARTICLE 19 INSURANCE Each party shall be responsible for maintaining insurance (which may include self insurance) in coverages and amounts sufficient to replace its own equipment, property and systems, together with its portion of any shared assets, to cover potential liabilities hereunder, and otherwise to comply with all applicable requirements of law. Upon request, each party shall deliver certificates evidencing such insurance to the other party, and otherwise comply with such requirements regarding such insurance as the other party may reasonably require and as are consistent with the provisions of this Article. Each party shall look to its own insurance (including self insurance and any deductible amount) as its exclusive remedy to recover damages for property damage, business interruption or extra expenses relating to an insurable event. Each party hereby waives its rights of recovery against the other for any loss insured by fire, extended coverage and other property insurance policies (including self insurance and any deductible amount) existing for the benefit of such party. Each party shall obtain from its insurer a waiver of subrogation against the other party. ARTICLE 20 TERMINATION SECTION 20.1 TERMINATION FOR CAUSE 23 In the event that either party is at any time in material breach of its obligations under this Agreement, the non-breaching party may elect to terminate this Agreement or the portion of this Agreement relating to such breach. The party seeking termination will provide the other party with sufficient reasonable prior written notice in reasonable detail of such material breach and the opportunity to cure the breach. If such breach is not cured within ten (10) days of notice of a monetary breach, or within thirty (30) days of notice of all other breaches, then the party not in default may terminate this Agreement (or such portion thereof) as of the date specified in such notice of termination. OLIN shall pay ARCH for Services performed through the date of termination or expiration of the term of this Agreement. The terminating party shall have all rights and remedies generally afforded by law or equity, subject to the limitations expressed in this Agreement. Such termination will proceed in an orderly manner, as soon as practical or in accordance with the schedule agreed to by OLIN and ARCH. SECTION 20.2 TERMINATION ASSISTANCE It is the intent of the parties that at the termination of this Agreement, ARCH will cooperate with OLIN to assist with the orderly transfer of the services, functions and operations provided by ARCH hereunder to OLIN itself or another services provider. Prior to termination of this Agreement, OLIN may request ARCH to perform and, if so requested, ARCH shall perform (except in the event of a termination due to a failure by OLIN to pay any amounts due and payable under this Agreement when due) Services in connection with migrating the work of OLIN to OLIN itself or another services provider. Services transfer assistance shall be provided until the date of termination with respect to the Services, and for expiration or termination related services other than those relating to the Services for up to three (3) additional months after the date of expiration or termination. If the Services transfer assistance requires ARCH to incur expenses in addition to the expenses that ARCH would otherwise incur in the performance of this Agreement then: 1) ARCH shall notify OLIN of any additional expenses associated with the performance of any additional services pursuant to this section prior to performing such services 2) upon OLIN's authorization, ARCH shall perform the additional services and invoice ARCH for such services, and 3) OLIN shall pay ARCH for such additional expenses incurred to provide the additional services in accordance with the provisions of Article 10 above. If prior to termination, ARCH has prepaid charges for a license to use any licensed program included in the Services, to the extent that the OLIN has the benefit of such license and 24 prepayment following termination, the OLIN agrees to reimburse ARCH an appropriate portion of the prepaid charges ARCH will transfer or assign to OLIN or its designee, upon OLIN's request, on mutually acceptable terms and conditions, any contracts applicable solely to Services being provided to OLIN for maintenance, disaster recovery services and other necessary third-party services (other than subcontractor services) then being used by ARCH to perform the Services, subject to the payment by OLIN of any transfer fee or charge imposed by the third party contractor. ARCH shall have no obligation to transfer or assign to OLIN any contracts for services, facilities or equipment for which usage is shared. Such contracts shall be governed by Section 16.2 and 16.3, as applicable. Termination activity shall begin upon ARCH's receipt of 1) notice of the termination for convenience, 2) notice of the termination for default, or 3) notice by OLIN of its intention not to renew. There is no additional charge for termination activities except in the case of when termination if for default caused by a breach by OLIN. Pre-migration Services . Freeze all non-critical software changes . Notify all outside ARCH of necessary ARCH-related procedures to be followed during the turnover phase . Review all software libraries (tests and production) with the new service provider and OLIN . Assist in establishing naming conventions for the new production site . Analyze space required for the databases and software libraries . Generate a tape and computer listing of the source code for the software to be provided to OLIN in a form reasonably requested by OLIN . Deliver all source code, technical specifications and materials, and user documentation for the software to OLIN and/or OLIN's designee . Provide listings of equipment and software leases and contracts used to support OLIN . Provide a transition plan for personnel who support OLIN . Explain the operations manual to new operations staff . Provide training to new operations staff if OLIN is assuming responsibility for the services, and assist with training if a third party is assuming responsibility . Provide system "walk throughs" . Provide a security transition plan . Submit a schedule for termination activities 25 Migration Services . Unload the production databases . Deliver tapes of production databases (with content listings) to the new operations staff, data files and tape libraries . Assist with the loading of databases . Assist with the communications network turnover . Assist in the execution of a parallel operation, until the Distribution Date of expiration or termination of this Agreement, including delivery to OLIN of the then current procedures manual Post-migration Services . Answer questions regarding the services on an "as needed" basis . Turnover any remaining OLIN-owned reports and documentation still in ARCH's possession SECTION 20.3 RETURN OF MATERIALS UPON TERMINATION Upon termination of this Agreement, each party will promptly deliver to the other party, or certify destruction of, all data, programs and similar materials of the other held in connection with the performance of the Agreement. ARTICLE 21 GENERAL TERMS SECTION 21.1 ENTIRE AGREEMENT The parties agree that this Agreement is the complete and exclusive statement of the agreement between the parties relating to the subject matter of this Agreement, which supersedes all proposals or prior agreements or representations whether oral or written and all other communications between the parties. SECTION 21.2 GOVERNING LAW This Agreement and its application and interpretation will be governed exclusively by the laws prevailing in the State of Connecticut. The courts of the State of Connecticut shall have exclusive jurisdiction over all matters arising in relation to this Agreement that are not subject to dispute resolution hereunder and each party hereby submits to the jurisdiction of the courts of the State of Connecticut. 26 SECTION 21.3 HEADINGS The article and section headings are for reference and convenience only and shall not be considered in the interpretation of this Agreement. SECTION 21.4 SEVERABILITY If any provision of this Agreement shall be prohibited by or be invalid under applicable law, it shall be deemed modified to reflect the original intentions of the parties as nearly as possible in accordance with applicable laws. If for any reason it is not deemed so modified, it shall be prohibited or invalid only to the extent of such prohibition or invalidity without the remainder thereof of any, such other provision being prohibited or invalid. If the remainder of this Agreement shall not be affected by such declaration or finding and is capable of substantial performance, then each provision not so affected shall be enforced to the extent permitted by law. SECTION 21.5 SURVIVAL ARCH and OLIN agree that the following Articles shall survive termination to the extent necessary to give effect to the intent and understanding of the parties: Article 10-Pricing and Payment, Article 14-Confidentiality, Article 17-Indemnification, Article 18-Limitation of Liability, and Article 20-Termination. SECTION 21.6 CONSENTS AND APPROVALS; COMPLIANCE WITH LAWS Each party agrees to obtain all necessary regulatory approvals applicable to its business, obtain and maintain in effect any necessary permits, and comply with all laws, rules and regulations applicable to the performance of the Services. SECTION 21.7 WAIVER No term or provision hereof shall be deemed waived and no breach excused, unless such waiver or consent shall be in writing and signed by the party claimed to have waived or consented. Any consent by any party to, or waiver of, a breach by the other, whether expressed or implied, shall not constitute a consent to, waiver of, or excuse for any other different or subsequent breach. SECTION 21.8 NOTICES Whenever one party is required or permitted to give notice to the other under this Agreement, such notice shall be made in writing (unless otherwise expressly provided elsewhere in this Agreement) and will be deemed given when received 1) by personal delivery, overnight 27 delivery courier or U.S. registered or certified mail, return receipt requested, postage prepaid or 2) by facsimile (provided that a copy thereof is also delivered promptly by one of the foregoing methods of delivery). Notices will be sent to the designated addresses. Either party may hereto from time to time change its address or person for notification purposes by giving the other prior written notice of the new address or person(s) and the date upon which it will become effective. Until notice of change of address has been given in the manner provided in this Section 21.8, notices shall be addressed as follows: If to ARCH: 501 Merritt 7 Norwalk, Connecticut 06851 Attention: Vice President - Information Technology [INSERT TELEPHONE NUMBER] [INSERT FACSIMILE NUMBER] If to OLIN: 501 Merritt 7 Norwalk, Connecticut 06851 Attention: Vice President and Comptroller [INSERT TELEPHONE NUMBER] [INSERT FACSIMILE NUMBER] SECTION 21.9 ASSIGNMENT Except for assignment by OLIN or ARCH to a parent, subsidiary or affiliate, neither party may assign its rights or obligations under this Agreement in whole or in part without the prior written consent of the other party, which consent shall not be unreasonably withheld. SECTION 21.10 SUBCONTRACTORS ARCH shall not subcontract the delivery of all or any substantial part of the Services provided to OLIN without the express prior written consent of OLIN, which consent shall not be unreasonably withheld. OLIN's approval of a subcontractor shall not relieve ARCH of its obligations under this Agreement. Nothing contained in this Agreement shall create any contractual relationship between a subcontractor and OLIN. ARCH agrees to bind every subcontractor by the terms and conditions of this Agreement, as far as appropriate and applicable, to the Services to be performed by the subcontractor. ARCH shall be fully 28 responsible to OLIN for the acts and omissions of all subcontractors and of persons directly or indirectly employed or contracted by any of them. SECTION 21.11 MERGERS AND ACQUISITIONS If OLIN acquires control of another entity or merges with another business organization during the Term of this Agreement, ARCH will to the extent reasonably possible at the time, if requested by OLIN, provide the Services to such entity, subject to agreement between ARCH and OLIN as to pricing for such Services, and mutually agreed upon reimbursement for any conversion expenses. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. OLIN CORPORATION By: ______________________________________________________________________ (signature) ______________________________________________________________________ (typed or printed) Title: ______________________________________________________________________ Date: ______________________________________________________________________ ARCH CHEMICALS, INC. By: ______________________________________________________________________ (signature) ______________________________________________________________________ (typed or printed) Title: ______________________________________________________________________ Date: ______________________________________________________________________ 29 EX-10.11 16 TRADE NAME LICENSE AGREEMENT EXHIBIT 10.11 TRADE NAME AND TRADEMARK LICENSE AGREEMENT ------------------------------------------ Agreement made as of __________, 1999, by and between OLIN CORPORATION, a Virginia corporation with offices at 501 Merritt 7, Norwalk, Connecticut 06856- 4500 ("Olin") and ARCH CHEMICALS, INC., a Virginia corporation with offices at 501 Merritt 7, Norwalk, Connecticut 06851 ("ARCH "). In consideration of the mutual covenants and obligations hereunder, Olin and ARCH (the "Parties" and each individually a "Party") agree as follows: WHEREAS, Olin has transferred to ARCH the Arch Assets and the Arch Business pursuant to the Distribution Agreement dated as of [ ] between Olin and ARCH (the "Distribution Agreement"), in anticipation of the spin-off of ARCH to the shareholders of Olin; and WHEREAS, ARCH wishes to use, and Olin is willing to license ARCH to use, certain trade names and trademarks associated with the Arch Business for the limited purposes provided herein. NOW, THEREFORE, Olin and ARCH agree as follows: 1 DEFINITIONS. Capitalized terms used herein without definitions shall have ----------- the respective meanings ascribed thereto in the Distribution Agreement 1.1 AFFILIATE. "Affiliate" shall mean, when used with respect to a --------- specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. 1.2 CONTROL. "Control" shall mean the possession, directly or indirectly, ------- of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms "Controlling" and "Controlled" shall have meanings correlative thereto. 1.3 PERSON. "Person" shall mean any natural person, corporation, ------ business trust, joint venture, association, company, partnership or government, or any agency or political sub-division thereof. 1 CONFIDENTIAL DRAFT DEC. 29, 1998 1.4 TRADE NAMES. "Trade Names" shall mean all of, and "Trade Name" shall ----------- mean any of, the following: OLIN, OLIN CORPORATION, OLIN MICROELECTRONIC MATERIALS, and OLIN CHEMICALS. 1.5 TRADEMARKS. "Trademarks" shall mean any or all of the trademarks ------------- listed in Appendix A. 2. LICENSE. Olin hereby grants to ARCH and its Subsidiaries companies a ------- worldwide, nonexclusive, royalty-free license to use the Trade Names and Trademarks in accordance with the terms of this Agreement. 3. LIMITED USE. ----------- 3.1 ARCH shall use the Trade Names and Trademarks only to the extent reasonably necessary: (i) To inform its customers and the public that ARCH includes the Arch Business and products formerly conducted or sold by Olin under the Trade Names and/or the Trademarks. In all uses of the Trade Names, ARCH shall ensure that the Trade Name appear in a less prominent position than its current business name, and appears only to inform the public (e.g., "ARCH Chemicals, Inc., formerly Olin Microelectronic Materials"). (ii) For purposes of operating under permits, licenses, and other governmental authorizations granted to Olin and assigned to ARCH (collectively "Permits"), and to provide ARCH the time necessary to amend the existing Permits or file applications for new Permits in ARCH's own name, and to continue required reporting or product delivery under the Trade Name(s) until the earlier of the effective date of the amended or new permits or the expiration of this Agreement. (iii) For completion of contracts and other agreements entered into by Olin prior to the Distribution Date under the Trade Names. (iv) To use up stocks of packaging and forms purchased by Olin and any of its subsidiaries prior to the Distribution Date and transferred to ARCH and any of its Subsidiaries. 3.2 ARCH shall not use any of the Trade Names and/or Trademarks in any manner that suggests an agency, partnership, or joint venture relationship with Olin. 2 CONFIDENTIAL DRAFT DEC. 29, 1998 3.3 Olin reserves all rights in the Trade Names and/or Trademarks not expressly granted to ARCH herein. 3.4 Olin agrees not to use any of the Trademarks or to renew the registration of any Trademarks which include as a part thereof, any trademark transferred to ARCH as of the Distribution Date pursuant to a certain Intellectual Property Transfer and License Agreement between ARCH and Olin of even date herewith. Olin further agrees not to use any of the Trademarks or to renew the registration of any Trademarks with respect to products for swimming pool, spa or hot tub applications. 4. REASONABLE EXTENSION. Olin shall not withhold its approval of any -------------------- extension of time that ARCH may reasonably request to continue to use any of the Trade Names or Trademarks, so long as (i) in Olin's reasonable judgment, ARCH is diligently proceeding in good faith to eliminate its use of any of the Trade Names and Trademarks, and (ii) in no event shall any such extension exceed 18 months following the Distribution Date. 5. QUALITY CONTROL. Upon Olin's request, ARCH will provide Olin with samples --------------- of each use of a Trade Name or Trademark for Olin's review and approval. ARCH shall immediately correct any deficiencies noted by Olin for failure to comply with this Agreement. The products sold by ARCH using a Trademark shall be of at least the same quality as those sold by Olin under such Trademark prior to this Agreement. 6. NO WARRANTY. Olin is licensing the Trade Names and Trademarks to ARCH "AS ----------- IS." Olin makes no representations or warranties as to the Trade Names or Trademarks, and hereby excludes all warranties, express or implied. 7. OWNERSHIP. ARCH acknowledges that Olin is the owner of the Trade Names --------- and Trademarks and owns all rights in the Trade Names and Trademarks, except for trademarks transferred by Olin to ARCH on the Distribution Date. ARCH shall take no action during or following the term of this Agreement contrary to, or in conflict with, Olin's rights in the Trade Names and Trademarks. Olin shall take no action during or following the term of this Agreement contrary to, or in conflict with, ARCH's rights in any trademark transferred by Olin to ARCH as of the Distribution Date. 8. INDEMNIFICATION. ARCH agrees to defend, indemnify, and hold Olin harmless --------------- from and against all losses, expenses (including reasonable legal fees and costs), damages, injuries, liabilities, and claims arising out of or relating to ARCH's use of any of the Trade Names and Trademarks. 9. TERM AND TERMINATION. -------------------- 3 CONFIDENTIAL DRAFT DEC. 29, 1998 9.1 This Agreement shall be effective for one (1) year beginning on the Distribution Date, unless sooner terminated as provided herein. 9.2 If either Party commits a material breach of this Agreement, then the non-breaching Party may give notice thereof in writing to the breaching Party. Upon receipt of such notice, the breaching Party shall have thirty (30) days from the date of receipt of such notice to cure such material breach. If the alleged material breach is not cured within such thirty (30) day period, the non-breaching Party may terminate this Agreement by sending a written notice of termination to the breaching Party. In such event, neither Party waives any rights to recover damages from such termination. 9.3 Immediately upon expiration or termination of this Agreement, ARCH will cease and desist from all uses of any of the Trade Names and Trademarks except for those trademarks transferred by Olin to ARCH as of the Distribution Date. 9.4 Each Party's obligations under Articles 6, 7, 8 and 9 shall survive expiration and termination of this Agreement. 10. FURTHER ASSURANCES. Each Party will execute all documents reasonably ------------------ requested by the other to effect any of the provisions of this Agreement. 11. NOTICES. Notices or requests to be given or made hereunder shall be ------- delivered in person or sent by registered mail or telefax or telex acknowledged by the operator of the addressee at the following addresses or other addresses that each Party may from time to time designate. (a) for ARCH: ARCH CHEMICALS, INC. 501 Merritt 7 Norwalk, Connecticut 06851 ATTENTION: General Counsel Tel: Fax: (b) for OLIN: OLIN CORPORATION 501 Merritt 7 Norwalk, Connecticut 06856-4500 Attention: Corporate Secretary 4 CONFIDENTIAL DRAFT DEC. 29, 1998 Tel: (203) 356-3126 Fax: (203) 356-2011 12. ASSIGNMENT ---------- 12.1.1 - The Agreement shall not be assigned by either Party to a third party without the prior written consent of the other Party and any other assignment shall be void. 12.1.2 - Notwithstanding the foregoing, this Agreement may be assigned to an AFFILIATE OF A PARTY, OR A SUCCESSOR IN THE BUSINESS TO WHICH THE AGREEMENT RELATES, OR A SUCCESSOR IN ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF EITHER PARTY, PROVIDED THAT THE SUCCESSOR AGREES IN WRITING TO ACCEPT THE RIGHTS AND TO BE BOUND BY THE OBLIGATIONS OF THE ASSIGNING PARTY. THE PARTIES AGREE TO GUARANTEE THE PERFORMANCE OF THEIR AFFILIATES UNDER THIS AGREEMENT. 12.2 CHANGE OF CONTROL - ----------------------- For purposes of Section 12.1.2 the following shall be deemed an assignment by a Party of this AGREEMENT WHICH SHALL REQUIRE THE WRITTEN ASSUMPTION OF OBLIGATIONS PROVIDED FOR THEREIN: 12.2.1: a Person (or two or more Persons acting as a "person" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934 Act")), other than such Party, or an employee benefit plan (or related trust) of such Party, becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act) of 15% or more of the then outstanding voting stock of such Party, or during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of such Party (together with any new director whose election by the Board or whose nomination for election by such Party'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 new directors then in office, and/or 12.2.2: any consolidation or merger of such Party in which such Party is not the continuing or surviving corporation or pursuant to which shares of such Party's common stock would be converted into cash, securities or other property other than a merger in which holders of such Party's common stock immediately prior to the merger will 5 CONFIDENTIAL DRAFT DEC. 29, 1998 have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, and/or 12.2.3: any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of such Party, and/or 12.2.4: adoption of any plan or proposal for the liquidation or dissolution of such Party. 12.3 VIOLATION. Any assignment made in violation of this Article 12 --------- shall be considered void. 13. GENERAL PROVISIONS. ------------------ 13.1 ENTIRE AGREEMENT. This Agreement embodies the entire understanding ---------------- of the Parties. No amendment or modification of the Agreement shall be valid or binding upon the Parties unless it is in writing and signed by the respective duly authorized officers of the Parties. 13.2 PARTIES ARE INDEPENDENT. This Agreement does not and shall not be ----------------------- deemed to make either Party the agent, legal representative or partner of the other Party for any purpose whatsoever, and neither Party shall have the right or authority to assume or create any obligation or responsibility whatsoever, expressed or implied, on behalf of or in the name of the other Party or to bind the other Party in any respect whatsoever. 13.3 WAIVER. The failure of either Party at any time to require ------ performance by the other Party of any provision hereof shall in no way affect the full right to require such performance within a reasonable time or thereafter the performance of that and all other provisions, nor shall the waiver of any succeeding breach of such provision or any other provision operate as a waiver of the provision itself. 13.4 SEVERABILITY. The invalidity or unenforceability of any one or more ------------ of the provisions of This Agreement shall not affect the validity or enforceability of the remaining provisions. 13.5 GOVERNING LAW. This Agreement shall be construed and governed, in ------------- all respects, by the law of the State of Connecticut applicable to contracts made and to be performed in that state without reference to any provisions relating to conflicts of law. 6 CONFIDENTIAL DRAFT DEC. 29, 1998 13.6 JURISDICTION. Each Party hereby irrevocably and unconditionally ------------ submits, for itself and its property, to the nonexclusive jurisdiction of any Connecticut State court or Federal court of the United States of America sitting anywhere within a radius of 50 miles from Norwalk, Connecticut, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the Parties hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Connecticut State court or, to the extent permitted by law, in such Federal court. Each of the Parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 13.7 VENUE. Each Party hereby irrevocably and unconditionally waives, to ----- the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any Connecticut State court or such Federal court located anywhere within a radius of fifty (50) miles from Norwalk, Connecticut. Each of the Parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 13.8 SERVICE OF PROCESS. Each Party to this Agreement irrevocably ------------------ consents to service of process in the manner provided for notices in Article 11 hereof. Nothing in this Agreement will affect the right of any Party to this Agreement to serve process in any other manner permitted by law. 13.9 COUNTERPARTS. This Agreement may be executed in any number of ------------ counterparts, each of which shall be deemed an original, but all of this shall constitute one and the same instrument 14. SETTLEMENT OF DISPUTES. In the event of any disputes arising out of or in ---------------------- connection with the execution, interpretation, performance or nonperformance of this Agreement, ARCH and Olin shall use the following procedure prior to either Party pursuing other available legal remedies: 14.1 ALTERNATIVE DISPUTE RESOLUTION. Upon signing of this Agreement each ------------------------------ Party will designate one representative ("Representative") for the purpose of resolving disputes which may arise from time to time. Upon a dispute arising, either or both Representatives may request in writing a conference with the other. If so requested, the conference shall occur within ten (10) days of the initial written request and shall be held via telephone or at Norwalk, Connecticut, or 7 CONFIDENTIAL DRAFT DEC. 29, 1998 elsewhere, at the option of the Representatives. The purpose and scope of the conference shall be limited to issues related to resolving the dispute. At the conference, each Representative, or his or her designee, shall use best efforts to attempt to resolve the dispute. If the dispute has not been settled within thirty (30) days of the first meeting of the Representatives, the Parties shall establish a Management Appeal Board ("MAB") within ten (10) days of receipt of a request by either Party to set up an MAB. The MAB shall consist of two (2) members of each Party's respective management. The President of OLIN shall appoint two members to represent OLIN and the President of ARCH shall appoint two members to represent ARCH. The sole purpose of MAB shall be to resolve any dispute over which the Representatives failed to resolve. The MAB members shall be persons other than the Representatives. The MAB shall meet at Norwalk, Connecticut or otherwise confer to resolve the dispute by good faith negotiations, which may include presentations by the Representatives or others. 14.2 ARBITRATION. In the event the Parties are unable to resolve their ----------- disputes after availing themselves of the processes set forth in Section 14.1 above for a period of ninety (90) days, such disputes, shall be solely and finally settled by three arbitrators in accordance with the Commercial Arbitration Rules of the AAA (the "Arbitration Rules"). The Party electing arbitration shall so notify the other Party in writing in accordance with the Arbitration Rules, and such notice shall be accompanied by the name of the arbitrator selected by the Party serving the notice. The second arbitrator shall be chosen by the other Party, and a neutral arbitrator shall be chosen by the two arbitrators so selected. If a Party fails to select an arbitrator or to advise the other Party of its selection within thirty (30) days after receipt by such a Party of the notice of the intent to arbitrate, the second arbitrator shall be selected by the AAA. If the third arbitrator shall not have been selected within thirty (30) days after the selection of the second arbitrator, the appointment of the third arbitrator shall be made by the AAA. All such proceedings shall be conducted in New York, New York. The arbitrator shall make detailed findings of fact and law in writing in support of the decision of the arbitrator panel, and is empowered to award reimbursement of attorneys' fees and other costs of arbitration to the prevailing Party, in such manner as the arbitrator panel shall deem appropriate. The provisions of this Section 14.2 shall not be deemed to preclude any Party hereto from seeking preliminary injunctive relief to protect or enforce its rights hereunder, or to prohibit any court from making preliminary findings of fact in connection with granting or denying such preliminary injunctive relief, or to preclude any Party hereto from seeking permanent injunctive or other equitable relief after and in accordance with the decision of the arbitrator panel. Whether any claim or controversy is arbitrable or litigable shall be determined solely by the arbitrator panel pursuant to the provisions of this Section 14.2. Any monetary award of the arbitration panel shall include interest from the date of any breach or any violation of this Agreement. The arbitrators shall fix an appropriate rate of interest from the date of the breach or other violation to the date when the award is paid in full. The Parties agree that judgment on 8 CONFIDENTIAL DRAFT DEC. 29, 1998 the arbitration award may be entered in any court having jurisdiction over the Parties or their assets. 14.3 CONTINUING OBLIGATIONS. It is expressly agreed that the failure of ---------------------- the Parties to resolve a dispute on any issue to be resolved hereunder shall not relieve either Party from any obligation set forth in this Agreement. In addition, notwithstanding the pendency of any such dispute, neither Party will be excused of its obligations hereunder to cooperate with the other to effectuate the purposes of this Agreement. IN WITNESS WHEREOF, each Party has caused its duly authorized representative to execute this Agreement as of the date first set forth above. OLIN CORPORATION ARCH CHEMICALS, INC. By______________ By___________________ Name: Name: Title: Title: 9 CONFIDENTIAL DRAFT DEC. 29, 1998 APPENDIX A TRADEMARKS CARECAR BROMOLIN OLIN OLIN (WITH A SPLIT O) OLIN (WITH A SPLIT O) AND DESIGN OLIN DURATION OLIN PACE OLIN HYPOCAL (STYLIZED) OLIN PH PLUS ISOLIN (STYLIZED WITH A SPLIT O) OLIN HTH SUPER SHOCK AND DESIGN (WITH A SPLIT O) PISCINE ET LOISIRS (STYLIZED) PHOSPHOLIN THERMOLIN HTH OLIN HTH (SUB) OLIN (WITH SPLIT O) S.O.S. PISCINAS AND DESIGN OLIFILM OLIMINE 10 EX-10.12 17 TRANSITION SERVICES AGREEMENT EXHIBIT 10.12 TRANSITION SERVICES AGREEMENT ----------------------------- THIS TRANSITION SERVICES AGREEMENT dated as of _________ , 1999, by and between ARCH CHEMICALS, INC., a Virginia corporation ("ARCH"), and OLIN CORPORATION, a Virginia corporation ("OLIN"). WITNESSETH: ---------- WHEREAS, OLIN and ARCH have entered into a Distribution Agreement (as defined below); WHEREAS, pursuant to the Distribution Agreement, OLIN has agreed to transfer certain assets and businesses constituting the Arch Assets and the Arch Business, respectively (each as defined in the Distribution Agreement) to ARCH; WHEREAS, prior to the Distribution Date (as defined in the Distribution Agreement), the Arch Business has received various support services from, and provided various support services to, OLIN and its subsidiaries; and WHEREAS, following the Distribution Date, OLIN and ARCH desire that for a period of transition and for purposes of continuity, OLIN continue to provide certain services to ARCH and its subsidiaries and that ARCH continue to provide certain services to OLIN and its subsidiaries, all in a manner and amount as historically provided prior to the Distribution Date, and on terms and conditions as set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, OLIN and ARCH agree as follows: 1. Definitions. ----------- The following terms have the meanings hereinafter assigned to them: "ARCH Services" means each Service listed on Exhibit A hereto. "Confidential Information" means any and all information disclosed to the receiving Party by a disclosing Party pursuant to this Agreement, in any form such as, but not limited to, visual, oral, written, graphic, electronic or model form, including but not limited to, know-how and trade secrets, whether of a business or a technical nature, whether patented or not and whether in the laboratory, pilot plant or commercial plant stage (including without limitation drawings, operating conditions, specifications, safety instructions, environmental recommendations, emergency instructions) owned or controlled by a Party. "Customer" means (i) with respect to OLIN Services, ARCH and its subsidiaries and (ii) with respect to ARCH Services, OLIN and its subsidiaries. "Distribution Agreement" means that certain Distribution Agreement, dated as of [ ], 1999, by and between ARCH and OLIN. "Employee Benefits Information" means information relating to the administration of ARCH's and OLIN's employee benefit programs as provided in Exhibits attached hereto, including but not limited to information and/or data submitted for reimbursement of, or in support of, any benefits claim (including but not limited to health, counseling, medical, dental, or disability claims). "Governmental Authority" means any federal, state or local government, governmental authority, regulatory or administrative agency, governmental commission, board, bureau, court or tribunal or any other similar arbitral body. "OLIN Services" means each Service listed on Exhibit B hereto. "Party" or "Parties" means either ARCH or OLIN or both of them. "Prime Rate" means the rate of interest published as the "Prime Rate" in the Wall Street Journal under the title "Money Rates" and defined therein as ------------------- being the base rate on corporate loans at large money center commercial banks (or if no longer published, an equivalent rate agreed by the Parties). "Provider" means (i) with respect to OLIN Services, OLIN and (ii) with respect to ARCH Services, ARCH. "Services" means the furnishing, supply, distribution and delivery of each service as set forth in Exhibit A or Exhibit B hereto to be provided by or on behalf of a Party pursuant to the terms and conditions of this Agreement. "Service Charge" - See Section 4 hereof. "Service Description" means the description of each individual Service respectively provided in Exhibits A and B. "Standard of Care" - See Section 2(b) hereof. 2 2. Services. -------- (a) Subject to the terms of this Agreement, (i) OLIN will provide to ARCH and its subsidiaries the OLIN Services in substantially the same manner, to the same location and as and to the extent provided by OLIN (and not by an outside contractor) to the Arch Business as it existed prior to the Distribution Date during the one-year period immediately preceding the date of this Agreement, and (ii) ARCH shall provide to OLIN and its subsidiaries the ARCH Services in substantially the same manner, to the same location and as and to the extent provided by the Arch Business as it existed prior to the Distribution Date (and not by an outside contractor) during the one-year period immediately preceding the date of this Agreement. (b) In providing the Services, the Provider shall employ the same standards of care, priority and diligence employed in providing services of the same type for itself and its affiliates ("Standard of Care"). (c) Exhibits A and B identifies the Services to be provided by the Parties and subject to the mutual agreement of the Parties acting reasonably, may be amended from time to time, to add any additional Services, or to modify or delete Services, as the Parties may agree. (d) No Provider employee shall be considered a Customer employee for any purpose, and the Provider shall provide the Services as an independent contractor. (e) The Customer shall, in a timely manner, take all such actions as may be reasonably necessary or desirable in order to enable or assist the Provider in the provision of the Services, including, but not limited to, providing necessary information and specific written authorizations and consents, and the Provider shall be relieved of its obligations hereunder to the extent that the Customer's failure to take any such action renders performance by the Provider of such obligations unlawful or impracticable. (f) A Provider shall not be required to expand its facilities, incur new long-term capital expenses or employ additional personnel to provide Services to the other Party. 3. Confidentiality. --------------- (a) Confidentiality Obligation. Each of the Parties agrees to keep -------------------------- confidential and neither disclose to others nor use, except as permitted herein, any Confidential Information or any Employee Benefits Information received from the other Party pursuant to this Agreement. (b) Limits on Disclosure. The receiving Party shall treat all Confidential -------------------- Information in the same manner and with the same degree of care (but in any event with no less of a degree of care than is reasonable for such information) as it uses with respect to its own Confidential Information of like nature, and shall disclose Confidential Information of the other Party only to 3 its employees who have a need to know it, provided that such employees agree in writing to be bound by all confidentiality obligations provided for in this Agreement. The receiving Party shall treat all Employee Benefits Information with highest standard of care reasonable for such information, and shall disclose Employee Benefit Information of the other Party only to its employees who have a strict need to know such information, provided that such employees agree in writing to be bound by all confidentiality obligations provided for in this Agreement. (c) Exceptions. The obligations set forth in this Section 3 shall not ---------- apply with respect to any Confidential Information which: (i) Public Knowledge. Is generally available to the public or ---------------- subsequently becomes generally available to the public through no breach by the receiving Party of secrecy obligations under this Agreement or prior agreements between the Parties concerning the Confidential Information; or (ii) Received from a Third Party. Is received from a third party who --------------------------- is legally free to disclose such Confidential Information and who did not receive such Confidential Information in confidence from the disclosing Party; or (iii) Independently Developed. Is independently developed by the ----------------------- receiving Party without reference to the Confidential Information received from the disclosing Party. (d) Permitted Disclosures. The provisions of this Section 3 --------------------- notwithstanding, in exercising the rights granted under this Agreement, either Party may disclose Confidential Information to others for the purpose of obtaining consulting services under a license agreement permitted hereunder, provided that any such third party, to which such Confidential Information is disclosed shall have first entered into a written secrecy and non-use agreement imposing obligations on such party that are at least as stringent as those imposed on the Parties pursuant to this Agreement. (e) Subpoena or Demand. The provisions of this Section 3 notwithstanding, ------------------ a Party may disclose Confidential Information and/or Employee Benefits Information pursuant to a subpoena or demand for production of documents in connection with any suit or arbitration proceeding, any administrative procedure or hearing before a governmental or administrative agency or instrumentality thereof, or any legislative hearing or other similar proceeding, provided that the receiving Party shall promptly notify the disclosing Party of the subpoena or demand and provided further that in such instances, the Parties use their reasonable best efforts to maintain the confidential nature of the Confidential Information and/or Employee Benefits Information by protective order or other means. 4 (f) Government Audit. The provisions of this Section 3 notwithstanding, a ---------------- Party may disclose Confidential Information (other than information which is not required by U.S. Government regulations to be made available to U.S. Government auditors (e.g., internal audit reports) to U.S. Government auditors upon request ---- during the performance of a governmental audit or review of any U.S. Government contract of such Party in the normal course of the audit function and according to standard practices; provided that prompt notice of the disclosure of such information shall be given prior to such disclosure to the Party from which the information was obtained. 4. Compensation. ------------ (a) Service Charge. In consideration of the provision of the Services, the -------------- Customer shall, for each Service performed, pay Provider monthly the applicable fee plus the additional charges set forth in Exhibits A or B (such monthly fee and additional charges being collectively, the "Service Charge" for such Service) which monthly fee shall be either (i) a base fee, as specified on Exhibits A or B, or (ii) if not otherwise specified, the Provider's directly allocable cost for such Service. Unless otherwise stated in Exhibits A or B, such allocations shall be made on a basis consistent with the allocation methodology used by OLIN immediately prior to the Distribution, which shall include a fair and reasonable allocation for Provider's employee benefit costs relating to employees, and for Provider's facilities and other overhead. In addition to such monthly fee, Provider shall be entitled to reimbursement from Receiver upon receipt of reasonable supporting documentation for all out-of- pocket expenses incurred in connection with Provider's provision of the Services which are not included as part of the normal allocated cost. The monthly Service Charge will be prorated for the number of days of Service received in the calendar month (based on a thirty day month) in which the Service is terminated. (b) Invoicing and Payments. The monthly fee of the Service Charge for any ---------------------- month will be paid in advance on the last business day of the preceding month except that the first monthly fee paid hereunder shall be paid immediately following the Distribution Date. Monthly fees which are based on cost allocations shall be estimated and paid based on then current budgeted cost allocations, with the Provider providing a reconciling invoice quarterly within thirty (30) days after the end of the quarter, and any net credit applied to the next monthly fees due thereafter and any net payment due from the Receiver within fifteen (15) days thereafter. Except as otherwise set forth herein, the Provider will invoice the Customer for any additional costs incurred by the Provider for the benefit of the Customer which are to be paid pursuant to Exhibits A or B hereto, and such invoices will be payable within fifteen (15) days of receipt. Upon termination of this Agreement, there will be a final accounting and each Party shall promptly pay to the other Party any amounts owed to the other Party. All payments due hereunder shall be made by electronic funds transfer unless otherwise agreed by the Parties. (c) Taxes. To the extent not included directly in the price the Provider ----- charges for Services, the Customer shall pay to the Provider the amount of any taxes or charges set forth in 5 (i) through (iii) below imposed now or in the future by any Governmental Authority including any increase in any such tax or charge imposed on Provider after the Distribution Date. (i) Any applicable sales, use, gross receipts, value added or similar tax that is imposed as a result of, or measured by, any sale or Service rendered hereunder unless covered by an exemption certificate, (ii) Any applicable real or personal property taxes, including any special assessments, and any impositions imposed on the Provider in lieu of or in substitution for such taxes on any property used in connection with any sale or Service rendered hereunder, and (iii) Any other governmental taxes, duties, and/or charges of any kind, excluding any income or franchise taxes imposed on the Provider, which the Provider is required to pay with respect to any sale or Service rendered hereunder. (d) Late Payments. In the event the Customer disputes the accuracy of any ------------- invoice, the Customer shall pay the undisputed portion of such invoice and the Parties will promptly meet and seek to resolve the dispute. If the Customer fails to pay any undisputed amount owed under this Agreement, the Customer shall correct such failure promptly following notice of the failure, and shall pay the Provider interest on the amount paid late at two percent (2%) above the Prime Rate prorated for the number of days such overdue amounts are outstanding. 5. Government Contracts. In the event that the Services to be performed -------------------- involve contracts the Customer may have as a U.S. Government prime contractor or subcontractor, the provisions of such contracts that are required by any applicable U.S. federal acquisition regulation, including but not limited to, the Walsh-Healey Public Contracts Act, Fair Labor Standards Act, Officials Not to Benefit, Covenant Against Contingent Fees, Nondiscrimination in Employment, Military Security Requirements, Office of Federal Procurement Policy Act and Examination of Records, shall be binding on Provider to the extent necessary to enable the Customer to meet its legal and contractual commitments. If the Services to be performed by Provider include the receiving, handling, or developing of any U.S. Government classified material or data, Provider agrees, and agrees to cause all persons or entities in its employ or control, to comply with all applicable security regulations and requirements. Each Provider agrees to immediately submit a confidential report to Customer whenever, for any cause, it has reason to believe that there is an active danger of espionage or sabotage affecting any work under such U.S. Government contracts. 6 Each Provider represents and warrants that it is familiar with the laws, rules, orders, and regulations applicable to the performance of U.S. Government procurement contracts with federal agencies including, but not limited to, the Department of Defense, the Department of Energy, and the National Aeronautics and Space Administration; that each will abide by all such laws, rules, orders and regulations; that it, and each of its employees performing Services hereunder, is eligible to act as a consultant to a U.S. Government defense contractor under all applicable federal laws and regulations regarding post- government employment; and that it will provide any and all certifications, representations, reports, records or any other document required to be submitted by suppliers under federal contracts. 6. Limitation of Liability; Indemnity. ---------------------------------- (a) A Provider shall have no liability to the Customer or any third party in connection with the provision of the Services except to the extent such Services were provided in breach of the Provider's Standard of Care and, in such a case, only to the extent of the following: (i) a dollar amount limited to the amount of insurance proceeds paid to Provider therefor from a third party insurance company, and (ii) at the option of the Customer, the Provider shall either: (x) perform again the particular Service performed in breach of the Standard of Care at no cost to Customer, or (y) give the Customer a refund of the portion of the Service Charge attributable to the cost of performance of the Service provided in breach of the Standard of Care. In no event shall the Provider be liable in connection with its provision of the Services for any indirect, special or consequential damages, including any fines or penalties payable by the Customer to any government agency, or for any loss of profits or other economic damages. (b) The Customer hereby agrees to indemnify and hold the Provider and its affiliates, officers, directors, agents and employees (collectively, the "Provider Indemnitees") harmless from and against any and all liabilities, losses, damages, expenses, fines and penalties of any kind, including reasonable attorneys' fees and disbursements, incurred by the Provider Indemnitees either: (i) as the result of any claim made against the Provider Indemnitees by any third party arising out of the Provider's provision of the Services (except to the extent, and only to the extent, of Provider's liability to Customer for the respective Service as provided in Paragraph 6(a) above); and/or 7 (ii) arising out of the Customer's negligence or malfeasance in connection with its use of the Services. 7. Insurance. The Provider shall procure and maintain fire, extended --------- casualty, public liability, worker's compensation, employer's liability, and such other types of insurance which are reasonably necessary to protect itself and the Customer and consistent with past practice (which may include self- insurance). If requested, such policies of insurance with third party insurers shall name Customer as an additional insured party to the extent applicable. 8. Force Majeure. Neither the Customer nor the Provider shall be liable ------------- for any delays in its performance hereunder caused by events beyond its reasonable control (a "force majeure event") including, without limitation: acts of God, acts of government, fire, equipment breakdown, strikes or other similar labor disputes (settlement of which shall be in the sole discretion of the employer), or the inability to acquire materials or third-party services. Upon the occurrence of any event which is reasonably expected to or does cause a delay in performance hereunder, the person or Party whose performance is or may be delayed shall give prompt written notice thereof to the Customer or Provider, as the case may be. The Parties shall use reasonable efforts to cooperate and minimize the impact of such force majeure event on the provision of Services. 9. Disputes. In the event of any disputes arising out of or in -------- connection with the execution, interpretation, performance or nonperformance of this Agreement, Provider and Customer shall use the following procedure prior to either Party pursuing other available legal remedies: Upon signing of this Agreement, each Party will designate one representative ("Representative") for the purpose of resolving disputes which may arise from time to time. A Party may change its Representative to act hereunder at any time upon notice to the other. Upon a dispute arising, either or both Representatives may request in writing a conference with the other. If so requested, the conference shall occur within ten (10) days of the initial written request and shall be held via telephone or at a mutually agreed upon location, at the option of the Representatives. The purpose and scope of the conference shall be limited to issues related to resolving the dispute. At the conference, each Representative shall use their reasonable best efforts to attempt to resolve the dispute. If the dispute has not been settled within thirty (30) days of the first meeting of the Representatives, the parties shall establish a Management Appeal Board ("MAB") within ten (10) days of receipt of a request by either Party to set up a MAB. The MAB shall consist of two (2) members of each respective Party's management. OLIN shall appoint two members to represent OLIN, and ARCH shall appoint two members to represent ARCH. The sole purpose of MAB shall be to resolve any dispute over which the Representatives failed to resolve. The MAB members shall be comprised of persons other than the Representatives. The MAB shall meet at OLIN's headquarters or other place mutually 8 agreed upon and shall confer to resolve the dispute by good faith negotiations, which may include presentations by the Representatives or others. In the event the Parties are unable to resolve their disputes within ninety (90) days after the establishment of a MAB, upon election by either Party such disputes shall be solely and finally settled by a board of three (3) arbitrators in accordance with the Commercial Arbitration Rules (the "Arbitration Rules") of the American Arbitration Association ("AAA"). The Party electing arbitration shall notify the other Party in writing in accordance with the Arbitration Rules and such notice shall be accompanied by the name of the arbitrator selected by the Party serving the notice. The other Party shall choose the second arbitrator, and the two arbitrators so selected shall choose a neutral arbitrator who shall be the third arbitrator. If a Party fails to select an arbitrator or to advise the other Party of its selection within thirty (30) days after receipt by such a Party of the notice of the intent to arbitrate, the second arbitrator shall be selected by the AAA. If the third arbitrator shall not have been selected within thirty (30) days after the selection of the second arbitrator, the appointment shall be made by the AAA. All such proceedings shall be conducted in Norwalk, Connecticut or another mutually agreed upon location. The arbitrators shall make detailed findings of fact and law in writing in support of the decision of the arbitrator panel, but shall not be empowered to award reimbursement of attorneys' fees and other costs of arbitration to the prevailing Party. The provisions of this Section 9 shall not be deemed to preclude any Party hereto from seeking preliminary injunctive relief to protect or enforce its rights hereunder, or to prohibit any court from making preliminary findings of fact in connection with granting or denying such preliminary injunctive relief, or to preclude any Party hereto from seeking permanent injunctive or other equitable relief after and in accordance with the decision of the arbitrator panel. Whether any claim or controversy is arbitrable or litigable shall be determined solely by the arbitrator panel pursuant to the provisions of this Section 9. Any monetary award of the arbitrators panel shall include interest from the date of any breach or any violation of this Agreement. The arbitrators shall fix an appropriate rate of interest from the date of the breach or other violation to the date when the award is paid in full. The Parties agree that the decision of the arbitrators shall be final and conclusive and that judgment on the arbitration award may be entered in any court having jurisdiction over the Parties or their assets. It is expressly agreed that the failure of the parties to resolve a dispute on any issue to be resolved hereunder shall not relieve either Party from any obligation set forth in this Agreement. In addition, the Parties expressly state their mutual determination that the failure to resolve any such disputes shall not hinder or delay the providing of the Services, and that, notwithstanding the pendency of any such dispute, neither Party will be excused of its obligations hereunder to cooperate with the other to effectuate the purposes of this Agreement. 10. Books and Records. The Provider shall, upon reasonable notice and ----------------- during normal business hours, allow the Customer's financial personnel reasonable access to its books, 9 records and other information necessary to confirm the calculation of the compensation and reimbursement due the Provider hereunder. 11. Term and Termination of Particular Services. ------------------------------------------- (a) The term of this Agreement shall commence as of the date hereof and shall continue until Services are no longer provided hereunder. Unless otherwise agreed by the Parties, each Service shall terminate on the earliest of (i) thirty (30) days (or such later date as is stipulated in the notice) following receipt by the Provider of written notice from the Customer to terminate the Service, (ii) the last day of the term for such Service as specified in the respective Service Description, or (iii) the date on which the Provider discontinues providing such Services to its own business, provided that the Provider has given the Receiver at least ninety (90) days' notice of its intention to discontinue such Service to its own operations. If the Provider employs a third party provider to provide a Service previously provided directly by the Provider, then it will request that such third party provide such Service to the Receiver. (b) Upon termination of a Service with respect to which the Provider holds books, records or files, including current and archived copies of computer files, owned by Customer and used by Provider in connection with the provision of a Service to Customer, Provider will return all of such books, records or files as soon as reasonably practicable, provided however, that Provider may make a copy, at its expense, of such books, records or files for archival purposes only. 12. Non-Waiver. The Customer's or the Provider's waiver of any breach or ---------- failure to enforce any of the terms or conditions of this Agreement at any time shall not in any way affect, limit or waive such person's right thereafter to enforce strict compliance with every term and condition hereof. 13. Assignment. Neither this Agreement nor any right or obligation ---------- hereunder is assignable or transferable by either party (in whole or part) without the prior written consent of the other party and any such purported assignment without such consent shall be void, except that either party shall have the right to assign this Agreement and its rights and obligations hereunder, without obtaining the prior written consent of the other party, to any entity with which the assigning party merges or transfers a substantial part of its assets or businesses to which this Agreement relates, provided that such assignee or transferee accepts such assignment or transfer and the rights and obligations hereunder in writing. Nothing in this Agreement, express or implied, is intended to confer any rights or remedies under this Agreement on any person or entity other than ARCH or OLIN and their respective successors and permitted assigns. 14. Applicable Law. This Agreement shall be governed by and construed in -------------- accordance with the laws of the State of Connecticut, without giving effect to its conflict of laws provisions. 10 15. Captions. The titles contained in this Agreement are for reference -------- purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 16. Amendment. This Agreement may be modified or amended only pursuant to --------- a written agreement executed on behalf of each of OLIN and ARCH. No modification or addition to this Agreement shall be effected by the acknowledgment or acceptance by either party of any purchase order, invoice, acknowledgment, release or other forms submitted by the other party containing additional, other or different terms or conditions. 17. Notices. All notices, consents, termination notices, and other ------- communications to be given hereunder, other than routine immaterial communications, shall be by telex or electronic facsimile, confirmed in writing as hereinafter provided, or in writing which shall be valid and sufficient only if delivered by hand, by confirmed facsimile (with a copy mailed first class to the address listed below promptly thereafter), by national overnight courier service or by registered or certified mail, return receipt requested, postage prepaid, addressed to the other party at its address as set forth below, or to such other address as has theretofore been designated by the other party by notice given in accordance with this Section. If to OLIN OLIN CORPORATION 501 Merritt 7 Norwalk, CT 06851 Attention: Corporate Secretary Telecopier: (203) 750-3018 If to ARCH ARCH CHEMICALS, INC. 501 Merritt 7 Norwalk, CT 06851 Attention: ___________ Telecopier: __________ 18. Entire Agreement. This Agreement (including the exhibits and ---------------- schedules referred to herein) constitutes the entire agreement with respect to the subject matter hereof between the parties hereto and supersedes all prior agreements and understandings, oral and written, between the parties hereto, with respect to the subject matter hereof. 11 19. Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which shall for all purposes be deemed to be an original and all of which together shall constitute one and the same instrument. 20. Severability. If any provision of this Agreement or the application ------------ of any such provision to any person or circumstances shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. OLIN CORPORATION By: ___________________________________ Name: Title: ARCH CHEMICALS, INC. By: ___________________________________ Name: Title: 12 EX-10.13 18 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS EXHIBIT 10.13 ARCH CHEMICALS, INC. 1999 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS 1. PURPOSE. The purpose of the Arch Chemicals, Inc. 1999 Stock Plan for Non-employee Directors is to promote the long-term growth and financial success of Arch Chemicals, Inc. by attracting and retaining non-employee directors of outstanding ability and by promoting a greater identity of interest between its non-employee directors and its shareholders. 2. DEFINITIONS. The following capitalized terms utilized herein have the following meanings: "Annual Director Grant" means the number of phantom shares of Common Stock, Options and/or Performance Shares to be granted annually to a Non- employee Director pursuant to Section 6(a), such number shall be fixed by the Board during 1999 following the Distribution Date and may be adjusted prospectively by such Board from time to time thereafter. "Arch Stock Account" means the Stock Account to which phantom shares of Common Stock are credited from time to time. "Board" means the Board of Directors of the Company. "Cash Account" means an account established under the Plan for a Non- employee Director to which cash meeting fees and retainers have been or are to be credited in the form of cash. "Change in Control" means any of the following: (i) the Company ceases to be, directly or indirectly, owned of record by at least 1,000 shareholders; (ii) a person, partnership, joint venture, corporation or other entity, or two or more of any of the foregoing acting as a "person" within the meaning of Section 13(d)(3) of the 1934 Act, other than the Company, a majority-owned subsidiary of the Company or an employee benefit plan of the Company or such subsidiary (or such plan's related trust), become(s) the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act) of 20% or more of the then outstanding voting stock of the Company; 2 (iii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board (together with any new director whose election by the Board or whose nomination for election by the Company's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office; (iv) all or substantially all of the business of the Company is disposed of pursuant to a merger, consolidation or other transaction in which the Company is not the surviving corporation or the Company combines with another company and is the surviving corporation (unless the shareholders of the Company immediately following such merger, consolidation, combination, or other transaction beneficially own, directly or indirectly, more than 50% of the aggregate voting stock or other ownership interests of (x) the entity or entities, if any, that succeed to the business of the Company or (y) the combined company); or (v) the shareholders of the Company approve a sale of all or substantially all of the assets of the Company or a liquidation or dissolution of the Company. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Committee" means the Compensation Committee (or its successor) of the Board. "Common Stock" means the Company's Common Stock, par value $1.00 per share. "Company" means Arch Chemicals, Inc., a Virginia corporation, and any successor. "Credit Date" means the first day of each calendar quarter, beginning with April 1, 1999. 3 "Distribution" means the distribution of the shares of the Company by Olin in a spinoff to Olin's shareholders. "Distribution Date" means the dividend payment date fixed by the Olin Board of Directors for the distribution of the shares of Common Stock to the public shareholders of Olin. "Excess Retainer" means with respect to a Non-employee Director the amount of the full annual cash retainer payable to such Non-employee Director from time to time by the Company for service as a director in excess of the amount paid in shares of Common Stock, if any, pursuant to Section 6(b). "Fair Market Value" means, with respect to a date, on a per share basis, (i) with respect to Common Stock or phantom shares of Common Stock, the average of the high and the low price of a share of Common Stock reported on the consolidated tape of the New York Stock Exchange (or such other primary exchange on which the Common Stock is traded) ("Exchange") on such date or if the Exchange is closed on such date, the next succeeding date on which it is open and (ii) with respect to phantom shares of Olin Common Stock, the average of the high and the low price of a share of Olin Common Stock reported on the consolidated tape of the Exchange on such date or if the Exchange is closed on such date, the next succeeding date on which it is open. "Interest Rate" means the rate of interest equal to the Company's before-tax cost of borrowing as determined from time to time by the Chief Financial Officer, the Treasurer or the Controller of the Company (or in the event there is no such borrowing, the Federal Reserve A1/P1 Composite rate for 90-day commercial paper plus 10 basis points, as determined by any such officer) or such other rate as determined from time to time by the Board or the Committee. "1999 Non-employee Director" means a Non-employee Director who becomes such on or after the Distribution Date but prior to December 31, 1999, and who was not a non-employee director of Olin. "1997 Plan" means the 1997 Stock Plan for Non-employee Directors of Olin Corporation as in effect on the Distribution Date. 4 "l934 Act" means the Securities Exchange Act of 1934, as amended from time to time. "Non-employee Director" means a member of the Board who is not an employee of the Company or any subsidiary thereof. "Olin" means Olin Corporation, a Virginia corporation. "Olin Common Stock" means shares of common stock of Olin, par value $1.00 per share. "Olin Stock Account" means the Stock Account to which phantom shares of Olin Common Stock are credited from time to time. "Option" means an option to purchase shares of Common Stock granted under Section 6(a)(2). "Performance Shares" means an award of phantom shares or units of Common Stock contingent upon the achievement of specified performance goals granted under Section 6(a)(3). "Plan" means this Arch Chemicals, Inc. 1999 Stock Plan for Non- employee Directors as amended from time to time. "Retirement Date" means the date the Non-employee Director ceases to be a member of the Board for any reason. "Stock Account" means an account established under the Plan for a Non- employee Director to which shares of stock have been or are to be credited in the form of phantom stock, including the Olin Stock Account and the Arch Stock Account. 3. TERM. The Plan shall be effective on the Distribution Date. Once effective, the Plan shall operate and shall remain in effect until terminated as provided in Section 9 hereof. 4. ADMINISTRATION. Full power and authority to construe, interpret and administer the Plan shall be vested in the Committee. Decisions of the Committee shall be final, conclusive and binding upon all parties. 5. PARTICIPATION. All Non-employee Directors shall participate in the Plan. 5 6. GRANTS AND DEFERRALS. (a) Annual Award. Each Non-employee Director who is serving as such on January 1 shall be credited with the Annual Director Grant on January 1 of each calendar year beginning not earlier than 2000. In the event a person becomes a Non-employee Director after January 1 of any calendar year beginning with 2000, such Non-employee Director shall not be credited with the Annual Director Grant for such year. By December 31 of each year commencing with 1999, the Board shall determine if the Annual Director Grant to each Non-employee Director for the next following calendar year shall be determined under (1), (2) or (3) below (or any combination thereof). (1) Stock Grant. Subject to the terms and conditions of the ----------- Plan, the Annual Director Grant may consist of a grant of phantom shares of Common Stock. Actual receipt of shares shall be deferred until the Non-employee Director's Retirement Date and each eligible Non-employee Director shall receive a credit to his or her Arch Stock Account in the amount of such shares as of January 1 of the calendar year for which the award is made. Subject to the approval of the Board, a Non-employee Director may elect in accordance with Section 6(e) to defer to his or her Arch Stock Account receipt of all or any portion of such shares to a date or dates on or following such Non-employee Director's Retirement Date. Except with respect to any shares the director has so deferred, certificates representing such shares shall be delivered to the Non-employee Director (or in the event of death, to his or her beneficiary designated pursuant to Section 6(h)) as soon as practicable following the Retirement Date. (2) Stock Options. Subject to the terms and conditions of the ------------- Plan and such additional terms and conditions, consistent with the terms of the Plan as the Committee shall determine, the Annual Director Grant may consist of a grant of Options. The exercise price per share of Common Stock of each Option shall be equal to the Fair Market Value of a share of Common Stock on the date of a grant. The term of each Option shall be equal to 10 years from the date of grant (whether or not the grantee continues to be a Non-employee Director for the full term). The Committee shall determine the time or times at which Options may be exercised in whole or in part (but in no event shall an Option be exercisable after the expiration of ten years 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. 6 (3) Performance Shares. Subject to the terms and conditions of ------------------ the Plan and such additional terms and conditions, consistent with the terms of the Plan as the Committee shall determine, the Annual Director Grant may consist of a grant of Performance Shares. Such award shall confer on the holder thereof the right to receive one share of Common Stock for each Performance Share credited to his Stock Account upon the achievement of specified performance goals during such performance periods as the Committee shall establish prior to the date of the grant. The performance goals to be achieved during any performance period and the length of any performance period shall be determined by the Committee, provided that a performance period shall be at least one year, subject to Section 6(g) hereof. The Committee may adjust the performance goals in the event of extraordinary or unusual events. Each eligible Non-employee Director shall receive a credit to his or her Arch Stock Account in the amount of such Performance Shares as of the January 1 of the calendar year for which the award is made. Actual receipt of the shares of Common Stock will be deferred until completion of the performance period and distribution will occur only if the performance goals are satisfied. Subject to the approval of the Board, a Non-employee Director may elect in accordance with Section 6(e) to further defer receipt of all or any portion of such Common Stock. Except with respect to any Performance Shares the Director has so deferred, certificates representing such shares shall be delivered to the Non-employee Director (or in the event of death, to his or her beneficiary designated pursuant to Section 6(h)) as soon as practicable following satisfaction of the performance goals and completion of the performance period. (b) Annual Retainer Stock Grant. By December 31 of each year commencing with 1999, the Board shall determine if all or any portion of the annual retainer for the next following calendar year shall be paid in shares of Common Stock. Subject to the terms and conditions of the Plan, if the Board determines for a calendar year that all or a portion of the annual retainer shall be paid in shares of Common Stock, on January 1 of such year, each Non- employee Director who is such on such date shall receive a specified number of shares of Common Stock as determined by the Board. In the event a person becomes a Non-employee Director beginning in or after 2000 on a date subsequent to January 1 during a calendar year and has not received the 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 7 equal to one-twelfth of the number of shares of the annual retainer to be paid in Common Stock times the number of whole calendar months remaining in such calendar year following the date he or she becomes a Non-employee Director. In the case of a 1999 Non-employee Director, for 1999 such person shall receive on the first day of the calendar month following his or her becoming such that number of shares (rounded up to the next whole share) of Common Stock having an aggregate Fair Market Value equal to $2084 times the number of whole calendar months remaining in the calendar year after he or she becomes a 1999 Non- Employee Director. The annual cash retainer payable to the Non-employee Director shall be reduced by the aggregate Fair Market Value of the shares the Non- employee Director receives or defers as the annual retainer stock grant (excluding any rounding of fractional shares) on the date the Non-employee Director becomes entitled to receive shares under this Section 6(b) for such calendar year. Subject to the approval of the Board (which approval shall not be required for a 1999 election by a 1999 Non-employee Director), a Non-employee Director may elect to defer receipt of all or any portion of such shares in accordance with Section 6(e). Except with respect to any shares the director has so deferred, certificates representing such shares shall be delivered to such Non-employee Director as soon as practicable following the date as of which the shares are awarded. (c) Election to Receive Meeting Fees and Excess Retainer in Stock in Lieu of Cash. Subject to the terms and conditions of the Plan and the approval of the Board, a Non-employee Director may elect to receive all or a portion of the director meeting fees and all or a portion of the Excess Retainer payable in cash by the Company for his or her services as a director for the calendar year in the form of shares of Common Stock. Such election shall be made in accordance with Section 6(e). If approved by the Board, the number of shares (rounded up to the next whole share in the event of a fractional share) for a calendar year payable to a Non-employee Director who so elects to receive all or a portion of the Excess Retainer in the form of shares for such year shall be paid on January 1 (or in the case of proration, when the annual stock retainer is to be paid or credited) equal to the amount of Excess Retainer which has been elected to be paid in shares divided by the Fair Market Value per share on January 1 of such calendar year (or in the case of a Non-employee Director who becomes such after January 1, on the first day of the calendar month following the day such new 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 8 the form of shares shall be equal to the aggregate amount on the Credit Date following such quarter of the director meeting fees which have been earned in such quarter and which are elected to be paid in shares divided by the Fair Market Value per share of Common Stock on such Credit Date. Except with respect to any shares the director has deferred, certificates representing such shares shall be delivered to the Non-employee Director as soon as practicable following the date as of which the Excess Retainer and/or meeting fees would have been paid in cash absent an election hereunder. Notwithstanding anything in the Plan to the contrary, the approval of the Board shall not be required for any 1999 election made by a 1999 Non-employee Director. (d) Deferrals of Meeting Fees and Excess Retainer. Subject to the terms and conditions of the Plan and the approval of the Board, a Non-employee Director may elect to defer all or a portion of the shares payable under Section 6(c) and all or a portion of the director meeting fees and Excess Retainer payable in cash by the Company for his or her service as a director for the calendar year. If approved by the Board, the amount of the Excess Retainer deferred in cash shall be credited on January 1 (or in the case of proration, on the first day of the next calendar month following the day such new Non-employee Director becomes such). Such election shall be made in accordance with Section 6(e). Subject to the approval of the Board, a Non-employee Director who elects to so defer shall have any deferred shares deferred in the form of shares of Common Stock and any deferred cash fees and retainer deferred in the form of cash. Notwithstanding any thing in the Plan to the contrary, the approval of the Board shall not be required for any 1999 election made by a 1999 Non-employee Director. (e) Elections. (1) Deferrals. All elections under Sections 6(a), 6(b), 6(c), 6(d), 6(e)(2) and 6(e)(3) shall (A) be made in writing and delivered to the Secretary of the Company and (B) be irrevocable. All Non-employee Director elections for payments in cash or stock or for deferrals shall be made before January 1 of the year in which the shares of Common Stock or director's fees and retainer are to be earned (or, in the case of an individual who becomes a Non-employee Director during a calendar year, prior to the date of his or her election as a director). Deferral 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 9 deferred amounts are to be paid, and the method of payment (lump sum or annual installments (up to 10)). However, subject to the approval of the Board, a Non-employee Director may elect to defer all of his or her cash dividends on the Stock Account in whole and not in part and all of his or her interest on the Cash Account in whole but not in part. Installment payments from an Account shall be equal to the Account balance (expressed in shares in the case of the Stock Account, otherwise the cash value of the Account) at the time of the installment payment times a fraction, the numerator of which is one and the denominator of which is the number of installments not yet paid. Fractional shares to be paid in any installment shall be rounded up to the next whole share. In the event of an election under Section 6(c) for director meeting fees or Excess Retainer to be paid in shares of Common Stock, the election shall specify the portion (in 25% increments) to be so paid. Any change with respect to the terms of a Non- employee Director's election for (A) amount or form of any future deferral or the form of payment of any director compensation hereunder may be made at any time prior to such compensation being earned (and in the case of quarterly fees, prior to the start of the quarter in which the fees are to be earned) and (B) the timing (which timing may not accelerate a distribution date) or amount of payments from any Account shall only be effective if made at least six months prior to the payout and in the calendar year prior to the calendar year payout is to occur. (2) Stock Account. On the Credit Date (or in the case of a proration, on the first day of the appropriate calendar month), a Non- employee Director who has deferred shares under Sections 6(b) or 6(d) shall receive a credit to his or her Stock Account. The amount of such credit shall be the number of shares so deferred (rounded to the next whole share in the event of a fractional share). A Non-employee Director may elect to defer the cash dividends paid on his or her Stock Account in accordance with Section 6(e)(1). (3) Cash Account. On the Credit Date or in the case of the Excess Retainer, on the day on which the Non-employee Director is entitled to receive such Excess Retainer, a Non-employee Director who has deferred cash fees 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 10 preceding quarterly period or the amount of the Excess Retainer to be paid for the calendar year, as the case may be, and in each case, specified for deferral in cash. A Non-employee Director may elect to defer interest paid on his or her Cash Account in accordance with Section 6(e)(1). (4) Dividends and Interest. Each time a cash dividend is paid on Common Stock or Olin Common Stock, a Non-employee Director who has shares of such stock (other than shares attributable to Performance Shares) credited to his or her Stock Account shall be paid on the dividend payment date such cash dividend in an amount equal to the product of the number of shares credited to the Non-employee Director's Arch Stock Account or Olin Stock Account, as the case may be, on the record date for such dividend times the dividend paid per share unless subject to the approval of the Board, the director has elected to defer such dividend to his or her Stock Account as provided herein, in which case the Non-employee Director shall receive a credit for such dividends on the dividend payment date to his or her Arch Stock Account or Olin Stock Account, as the case may be. The amount of the dividend credit shall be the number of shares (rounded to the nearest one-thousandth of a share) of Common Stock determined by multiplying the dividend amount per share by the number of shares credited to such director's applicable Stock Account as of the record date for the dividend and dividing the product by the Fair Market Value per share on the dividend payment date. At the election of the Board, dividend equivalents (determined as described above) shall also be paid with respect to Performance Shares held in a Non-employee Director's Arch Stock Account; provided, however, that such dividend equivalents shall be automatically -------- ------- deferred until, when and if the underlying Performance Shares are distributed in the form of Common Stock. A Non-employee Director who has a Cash Account shall be paid directly on each Credit Date interest on such account's balance at the end of the preceding quarter, payable at a rate equal to the Interest Rate in effect for such preceding quarter unless with the approval of the Board, such Non-employee Director has elected to defer such interest to his or her Cash Account, in which case such interest shall be credited to such Cash Account on the Credit Date. (5) Payouts. Cash Accounts and the Olin Stock Account will be paid out in cash, and the Arch Stock 11 Accounts shall be paid out in shares of Common Stock. Cash amounts and certificates representing shares credited to the Arch Stock Account shall be delivered to the Non-employee Director as soon as practicable following the termination of the deferral and consistent therewith. (f) No Stock Rights. Except as expressly provided herein, the deferral of shares of Common Stock into a Stock Account shall confer no rights upon such Non-employee Director, as a shareholder of the Company or otherwise, with respect to the shares held in such Stock Account, but shall confer only the right to receive such shares credited as and when provided herein. A Non- employee Director who has been granted an Option hereunder shall have no rights as a shareholder until such time as his or her Option is exercised. (g) Change in Control. Notwithstanding anything to the contrary in this Plan or any election, in the event a Change in Control occurs, (1) all Performance Shares shall become vested and deemed earned in full notwithstanding that the applicable performance cycle shall not have been completed, and (2) amounts and shares credited to Cash Accounts (including interest accrued to the date of payout) and Stock Accounts shall be promptly distributed to Non-employee Directors except that the Arch Stock Account shall be paid out in cash and not in the form of shares of Common Stock. For this purpose, the cash value of the amount in the Arch Stock Account shall be determined by multiplying the number of shares held in the Arch Stock Account by the higher of (i) the highest Fair Market Value on any date within the period commencing 30 days prior to such Change in Control and ending on the date of the Change in Control, or (ii) if the Change in Control occurs as a result of a tender or exchange offer or consummation of a corporate transaction, then the highest price paid per share of Common Stock pursuant thereto. (h) Beneficiaries. A Non-employee Director may designate at any time and from time to time a beneficiary for his or her Stock and Cash Accounts in the event his or her Stock or Cash Account may be paid out following his or her death. Such designation shall be in writing and must be received by the Company prior to the death to be effective. (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 12 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. 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. 13 8. STOCK ADJUSTMENTS. In the event of any merger, consolidation, stock or other non-cash dividend, extraordinary cash dividend, split-up, spin-off, combination or exchange of shares or recapitalization or change in capitalization, or any other similar corporate event, the Committee may make such adjustments in (i) the aggregate number of shares of Common Stock that may be issued under the Plan as set forth in Section 7(a) and the number of shares and/or Options that may be issued to a Non-employee Director with respect to any year as set forth in Section 6(a) and the number of shares of Olin Common Stock or Arch Common Stock, as the case may be, held in a Stock Account, (ii) the class of shares that may be issued under the Plan, (iii) the amount and type of payment that may be made in respect of unpaid dividends on shares of Common Stock or Olin Common Stock whose receipt has been deferred pursuant to Section 6(e), and (iv) the exercise price with respect to any award of Options or, if the Committee deems it appropriate, make provision for cash payment to the holder of an outstanding Option, as the Committee shall deem appropriate in the circumstances. The determination by the Committee as to the terms of any of the foregoing adjustments shall be final, conclusive and binding for all purposes of the Plan. 9. AMENDMENT AND TERMINATION. This Plan may be amended, suspended or terminated by action of the Board. No termination of the Plan shall adversely affect the rights of any Non-employee Director with respect to any amounts otherwise payable or credited to his or her Cash Account or Stock Account. 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 14 Committee, and in all events the Plan shall be construed in favor of it\s meeting the requirements of an exemption. EX-10.14 19 1999 LONG TERM INCENTIVE PLAN EXHIBIT 10.14 ARCH CHEMICALS, INC. 1999 LONG TERM INCENTIVE PLAN 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 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. 2 (g) "Dividend Equivalent" means any right granted under Section 6(d)(iv) of the Plan. (h) "Fair Market Value" means, with respect to any property (including, without limitation, Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. (i) "Incentive Stock Option" means an option to purchase Shares granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code or a successor provision thereto. (j) "Non-Qualified Stock Option" means an option to purchase Shares granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option. (k) "Option" means an Incentive Stock Option or a Non-Qualified Stock Option. (l) "Participant" means a Salaried Employee granted an Award under the Plan. (m) "Performance Award" means any award granted under Section 6(c) of the Plan. (n) "Person" means any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, or government or political subdivision thereof. (o) "Released Securities" means securities that were Restricted Securities with respect to which all applicable restrictions imposed under the terms of the relevant Award have expired, lapsed or been waived or satisfied. (p) "Restricted Securities" means Awards of Restricted Stock or other Awards under which outstanding Shares are held subject to certain restrictions. (q) "Restricted Stock" means any Share granted under Section 6(b) of the Plan. (r) "Restricted Stock Unit" means any right granted under Section 6(b) of the Plan that is denominated in Shares. 3 (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, 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 4 under the Pan 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 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. 5 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. (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 6 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 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 7 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. 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. 8 (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 arrangement, provided that the purchase or exercise price under an Award encompassing the right to purchase Shares shall not be reduced by the cancelation of such Award and the substitution of another Award. Awards so granted may be granted either at the same time as or at a different time from the grant of such other Awards or awards or benefits. (iii) Forms of Payment Under Awards. Subject to the terms of the 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 9 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 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. 10 (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 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. 11 (x) Withholding. The Company or any Affiliate may withhold from ----------- any Award granted or any payment due or transfer made under any Award or under the Plan the amount (in cash, Shares, other securities, other Awards, or other property) of withholding taxes due in respect of an Award, its exercise or any payment under such Award or under the Plan, and take such other action as may be necessary in the opinion of the Company or Affiliate to satisfy all obligations for the payment of such taxes. (xi) Other Compensation Arrangements. Nothing contained in the ------------------------------- Plan 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 altering the intent of 12 the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect. (xv) No Trust or Fund Created. Neither the Plan nor any Award ------------------------ shall 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 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, 13 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 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. 14 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 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. 15 (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 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 16 relevant given the applicable facts and circumstances. The Participant shall be free, however, to purchase as an investment or otherwise, stock or other securities of such organization or business so long as they are listed upon a recognized securities exchange or traded over the counter, and such investment does not represent a substantial investment to the Participant or a greater than 1% equity interest in the organization or business. (ii) Participant shall not, without prior written authorization from the Company, disclose to anyone outside the Company, or use in other than the Company's business, any secret or confidential information, knowledge or data, relating to the business of the Company or an Affiliate in violation of his or her agreement with the Company or the Affiliate. (iii) A Participant, pursuant to his or her agreement with the Company or an Affiliate, shall disclose promptly and assign to the Company or the Affiliate all right, title and interest in any invention or idea, patentable or not, made or conceived by the Participant during employment by the Company or the Affiliate, relating in any manner to the actual or anticipated business, research or development work of the Company or the Affiliate and shall do anything reasonably necessary to enable the Company or the Affiliate to secure a patent where appropriate in the United States and in foreign countries. (b) Notwithstanding any other provision of the Plan, the Committee in its sole discretion may cancel any Award at any time prior to the exercise thereof, if the employment of the Participant shall be terminated, other than by reason of death, unless the conditions in this Section 8 are met. (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 17 rescission within two years after such exercise payment or delivery and within 10 days after receiving such notice, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of the exercise, payment or delivery rescinded. Such payment shall be made either in cash or by returning to the Company the number of Shares that the Participant received in connection with the rescinded exercise, payment or delivery. (d) Upon exercise, payment or delivery pursuant to an Award, the Committee may require the Participant to certify on a form acceptable to the Committee, that he or she is in compliance with the terms and conditions of the Plan. (e) Nothing herein shall be interpreted to limit the obligations of a Participant under his or her employee agreement or any other agreement with the Company. Section 9. Change in Control ----------------- (a) Except as the Board or the Committee may expressly provide otherwise prior to a Change in Control of the Company (as defined below) and subject to the provisions of Section 6(d)(vii) hereof, 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. 18 (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 interests of (x) the entity or entities, if any, that succeed to the business of the Company or (y) the combined company); or 19 (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 February 1, 1999. 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. EX-10.15 20 SUPPLEMENTAL CONTRIBUTING EMPLOYEE OWNERSHIP PLAN EXHIBIT 10.15 ARCH SUPPLEMENTAL CONTRIBUTING EMPLOYEE OWNERSHIP PLAN Arch Chemicals, Inc. ("Arch") hereby establishes a Supplemental Contributing Employee Ownership Plan (the "Plan" or "SCEOP"), effective February 1, 1999 or, if later, the effective date of the spin-off of Arch from Olin Corporation (the "Effective Date"). The Plan is intended to be an unfunded, nonqualified deferred compensation plan for certain management and highly compensated employees, as described in Section 201(2) and 301(a)(3) of the Employee Retirement Income Security Act ("ERISA"). Arch is a participating employer in the multiple employer plan known as the Olin Corporation Contributing Employee Ownership Plan (as from time to time amended, the "CEOP"). The purpose of this Plan is to permit certain executive employees of Arch, whose contributions to the CEOP are limited under Sections 401(a)(17) of the Internal Revenue Code of 1986 and the regulations promulgated thereunder (the "Code"), with certain supplemental benefits to make up for such Code-imposed limitations. ARTICLE I DEFINITIONS AND GENERAL PROVISIONS 1.1 Except as otherwise provided herein, the terms defined in the CEOP are used herein with the meanings ascribed to them in the CEOP. In addition, when used herein, the following definitions shall apply: (a) "Arch Phantom Units" means phantom units of the CEOP's Arch Common Stock Fund credited under the SCEOP, such units deemed to consist of both Arch Common Stock and cash. (b) "CEOP Percentage" means, with respect to a SCEOP Participant, the annual percentage by which such Participant reduces his Maximum Eligible Compensation on either a before-tax or after-tax basis in calculating Contributions made to the CEOP; provided, however, that, if a Participant's CEOP percentage exceeds six percent (6%), the Participant may elect, for purposes of this Plan, to limit the CEOP percentage used under this Plan to six percent (6%). (c) "Company" or "Arch" means Arch Chemicals, Inc. and its affiliated companies. (d) "Compensation" has the same meaning as under the CEOP, except that it is not subject to the maximum dollar limitation on compensation taken into account for purposes of the CEOP under Section 401(a)(17) of the Code. (e) "Distribution Date" has the same meaning as that specified in the Distribution Agreement by and between Olin Corporation and Arch Chemicals, Inc. (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 (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) 3 days following such individual becoming an Eligible Employee. An Eligible Employee not filing such an agreement within the thirty (30) day period referred to in the preceding sentence must thereafter file such agreement to reduce Compensation by December 1 of the calendar year prior to the beginning of the Plan Year for which it will be effective and prior to the calendar year in which such Compensation would otherwise be earned. Once filed, agreements to reduce Compensation shall remain in effect for subsequent Plan Years unless revoked by the Participant in writing in a form acceptable to the Plan Administrator. 2.3 Any election to reduce salary shall be irrevocable for the Plan Year to which it relates, provided, however, that during a Plan Year a Participant may elect to cease all salary reductions for the remainder of the Plan Year, in which case, no subsequent election shall be effective until the beginning of the next Plan Year. 2.4 No salary reduction election shall be given effect under this Plan until the Participant has contributed to the CEOP the maximum amount permitted by the CEOP and by applicable law for the Plan Year to which such salary reduction election relates. ARTICLE III CONTRIBUTIONS AND ACCOUNTS 3.1 Each Eligible Employee who, immediately prior to the Distribution Date, was a participant in the Olin SCEOP shall be credited with an opening Account Balance under this Plan equal to the same number of Arch Phantom Units, Olin Phantom Units and Primex Phantom Units (if any) as were credited to his account under the terms of the Olin SCEOP as of the Distribution Date. Any Eligible Employee whose employment is transferred to Arch after its spin-off from Olin, but before February 1, 2000, shall have his or her Olin SCEOP account balances transferred to this Plan and his or her opening Account Balance shall be determined based upon the number of Olin Phantom Units, Primex Phantom Units, and Arch Phantom Units credited to his Olin SCEOP account as of the date he becomes employed by Arch. No additional Olin Phantom Units or Primex Phantom Units may be acquired under this Plan, whether through the crediting of Dividend Equivalents, through contributions to the Plan, or through deemed transfers of sub-accounts under the Plan. Notwithstanding this Section 3.1, no Eligible Employee who, immediately prior to his employment by Arch, had an account balance in the Olin SCEOP shall be credited with an initial Account Balance under this Plan attributable to his participation in the Olin SCEOP until such employee has released Olin Corporation and its affiliates, and the Olin SCEOP, from any liability, or claim for benefits, with respect to the employee's participation in the Olin SCEOP. 3.2 In conjunction with establishing this Plan, Arch hereby assumes the liabilities of Olin for the provision of benefits to participants who, immediately prior to the Distribution Date, were participants in the Olin SCEOP and who, on and after the Effective Date and before February 1, 2000 transfer to, and become employed by Arch or its affiliated companies ("Arch Employees"). In consideration of such assumption of liability, Olin has transferred, as of the 4 Effective Date, to Arch (or to a rabbi trust established by Arch) the reserves (including any associated assets held in a rabbi trust or similar vehicle) reflecting the value of the accrued liabilities being transferred, determined in accordance with Olin's established policies and accounting methods, uniformly applied for calculating liabilities under its non-qualified plans. In the event that Olin or its affiliates re-employs any Arch Employee before February 1, 2000, Olin shall assume the liability under this Plan associated with such re- employed individual and re-enrolling such individual in the Olin SCEOP to the extent he or she is then eligible, provided the employee releases Arch and this Plan from such liability. 3.3 Each SCEOP Participant who so elects for a Plan Year shall defer SCEOP Participant Contributions on a pre-tax basis. For each SCEOP Participant, a SCEOP Account will be established. The Account will contain sub-accounts for each type of contribution credited to the SCEOP Account and for each type of Phantom Unit credited to his Account. For each Plan Year during which a person is a SCEOP Participant and making deferrals, the Company (or other Participating Employer) will credit to the SCEOP Account of each SCEOP Participant the number of Arch Phantom Units equal in value to the sum of (1) the SCEOP Participant Contribution, plus (2) the Excess Company Matching Contribution, plus (3) the Excess Performance Contribution, if any. Such crediting shall occur periodically in accordance with the timing of contributions to the CEOP, in the case of the SCEOP Participant Contributions and Excess Company Matching Contributions, and as soon as administratively feasible following the making of a Performance Matching Contribution under the CEOP, in the case of an Excess Performance Contribution. 3.4 A Participant's SCEOP Account will also be credited with Dividend Equivalents from time to time, solely in the form of additional Arch Phantom Units, when such dividends are paid (i) on the actual number of shares of Arch Common Stock reflected in the Arch Phantom Units held in such Account, (ii) on the actual number of shares of Olin Common Stock reflected in the Olin Phantom Units held in such Account and (iii) on the actual number of shares of Primex Common Stock reflected in Primex Phantom Units held in such Account. 3.5 For purposes of calculating the number of Arch Phantom Units to be credited to an Arch Participant's SCEOP Account as a result crediting Dividend Equivalents or contributions, the SCEOP shall use the Current Market Value for valuing units in the Arch Common Stock Fund as defined under the CEOP. Phantom Units will be credited in fractional amounts up to three decimal places. For purposes of valuing Olin Phantom Units and Primex Phantom Units under this Plan, the SCEOP shall use the Current Market Value for valuing units in Olin Common Stock Fund and Primex Common Stock Fund, respectively, as defined in the CEOP. 3.6 SCEOP Participants may either retain their Olin and/or Primex Phantom Units or may have their entire Olin and/or Primex Phantom Unit Account Balance(s) deemed transferred at the then Current Market Value and reinvested in Arch Phantom Units at the then Current Market Value. Once Olin and/or Primex Phantom Units are deemed transferred and reinvested, a Participant may not re- direct investment back into Olin Phantom Units or Primex Phantom Units. 5 No new investment, whether in the form of Company or Participant contributions or Dividend Equivalents, shall be permitted in Olin Phantom Units or Primex Phantom Units. 3.7 A Participant shall at all times be fully vested in his SCEOP Participant Contribution Account Balance, and shall vest in his Excess Company Matching and Excess Performance Contribution Account Balances in accordance with the vesting schedule contained in the CEOP. Each Participant shall be deemed vested in his SCEOP Account Balance to the same extent that he is actually vested in his CEOP Account Balance. For purposes of determining an Arch Participant's vested percentage under this SCEOP, such Participant's past service with Olin shall be recognized to the same extent as if such service had been rendered with Arch. A Participant shall be fully vested in his SCEOP Account Balance upon his death, upon his termination of service from the Company and all affiliates after reaching a retirement date under the CEOP, or upon his termination of service due to his Permanent Disability as defined in the CEOP. 3.8 In the event that the Compensation Committee of the Board ("the Committee") determines that any dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Arch Common Stock, Olin Common Stock, Primex Common Stock, or any other securities of Arch, Olin or Primex, issuance of warrants or other rights to purchase Arch, Common Stock, Olin Common Stock, Primex Common Stock or other securities of these companies, or other similar corporate transaction or event occurs that affects Arch, Olin or Primex Common Stock such that the Committee determines an adjustment in Phantom Units under the Plan is appropriate in order to prevent dilution or enlargement of the benefits intended to be made available under this Plan, then the Committee shall, in such manner as it deems equitable, adjust Participants' SCEOP Accounts. In the case of a spin-off, split-up, issuance of an extraordinary stock dividend, or similar transaction, such adjustment, in the Committee's discretion, may result in creation of phantom shares in a separate phantom stock fund, reinvestment of such phantom shares in Arch Phantom Units, and the like. Notwithstanding the foregoing, a Participant to whom Dividend Equivalents have been allocated shall not be entitled to receive a non-cash special or extraordinary dividend or distribution unless the Committee expressly authorizes such receipt. 3.9 Transfers between Arch and Olin. It is contemplated that Plan --------------------------------- Participants may transfer their employment after the Distribution Date and before February 1, 2000 from Arch to Olin and vice versa and commence, or ---- ----- resume, participation in the SCEOP of the new employer. (a) Transfer to Olin From Arch. In the event that a Plan Participant --------------------------- transfers employment to Olin prior to February 1, 2000, benefit accrual under this Plan shall cease and Arch shall remain liable for payment of any benefits accrued under this Plan to the date of transfer. No separation from service shall be deemed to occur under this Plan permitting a distribution under this Plan and benefits hereunder shall not commence until the Participant has terminated his employment with Olin and has otherwise qualified for benefits hereunder. Arch shall continue to 6 recognize a Participant's service with Olin and its affiliates subsequent to his transfer to Olin solely for purposes of determining the Participant's vesting under this Plan. (b) Transfer from Olin to Arch. In the event that an Olin employee --------------------------- transfers employment to Arch from Olin prior to February 1, 2000, benefit accrual under the Olin SCEOP shall cease and Olin shall remain liable for payment of any benefits accrued under that Plan to the employee's date of transfer to Arch. Benefits shall not commence under the Olin SCEOP until the former Olin employee terminates service with Arch and its affiliates and has otherwise qualified for benefits under the Olin SCEOP. Following such transfer, Olin shall continue to credit such employee's service with Arch and its affiliates subsequent to his transfer to Arch solely for purposes of determining his vesting under the Olin SCEOP. ARTICLE IV DISTRIBUTIONS 4.1 No amounts credited to a Participant's SCEOP Account under this Plan may be withdrawn or distributed prior to the Participant's termination of employment with the Company and all affiliates thereof, including, but not limited to any other corporation in the same controlled group with Arch (within the meaning of Section 414(b), (c) and (m) of the Code). Amounts credited to a Participant's Account under this Plan may not be loaned to such Participant. A Participant's SCEOP Account will be distributed in the form elected under Section 4.2 upon the earliest to occur of the Participant's death, termination of service due to Permanent Disability, retirement or termination of active service from the Company and all affiliates. In the event that an Arch Employee is re-employed by Olin prior to February 1, 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 7 distribution shall be based on the Current Market Value of units in the Arch Common Stock Fund and, if applicable, the Olin Common Stock Fund and Primex Common Stock Fund, as calculated in accordance with the CEOP at the close of business on the last business day immediately preceding the date on which the distribution is to be effective. 4.5 Any benefit payable under this Plan on account of the death of a Participant shall be paid to the Participant's beneficiary as designated or determined under the terms of the CEOP. ARTICLE V LIABILITY FOR PAYMENT 5.1 The Company (and each other Participating Employer) shall pay the benefits provided hereunder with respect to SCEOP Participants who are employed or were formerly employed by it during their participation in the Plan. In the case of a SCEOP Participant who was employed by more than one Participating Employer, the Committee shall allocate the cost of such benefits among such Participating Employers in such manner as it deems equitable. The obligations of the Participating Employer hereunder shall not be funded in any manner. The rights of any person to receive benefits under this Plan are limited to those of a general creditor of the Participating Employer liable for such benefits hereunder. ARTICLE VI ADMINISTRATION OF THE PLAN 6.1 The Benefit Plan 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; 8 (c) interpret the provisions of the Plan and make and publish such rules for regulation of the Plan as are consistent with the terms hereof; (d) assist any Participant regarding his rights, benefits or elections available under the Plan; and (e) communicate to Employees, Participants and their Beneficiaries concerning the provisions of the Plan. The Plan Administrator shall keep a record of all actions taken and shall keep such other books of account, records and other information that may be necessary for proper administration of the Plan. The Plan Administrator shall file and distribute all reports that may be required by the Internal Revenue Service, Department of Labor or others, as required by law. The Plan Administrator may appoint accountants, actuaries, counsel, advisors and other persons that it deems necessary or desirable in connection with the administration of the Plan. 6.2 Except as otherwise provided herein, all provisions set forth in the CEOP with respect to the administration of that plan shall also be applicable with respect to this Plan. For purposes of this Plan, the Company shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Company or by Olin Corporation with respect to the CEOP. ARTICLE VII AMENDMENT, TERMINATION AND CHANGE OF CONTROL 7.1 The Company reserves the right to amend or terminate this Plan at any time, by action of the Company's Board of Directors, the Compensation Committee of the Board, or such other committee from time to time designated by the Board, and without the consent of any employee or other person. 7.2 Notwithstanding Section 7.1 above, no amendment or termination of the Plan shall directly or indirectly reduce the balance to the credit of any Participant hereunder as of the effective date of such amendment or termination. Upon termination of the Plan, no additional amounts shall be credited under the terms of the Plan. Notwithstanding the termination of this Plan, amounts credited hereunder shall not be distributed to Participants except as provided in Article IV, above. 7.3 Upon a Change of Control (as defined below), the Plan shall terminate and the Account Balance of a SCEOP Participant shall be paid in cash to such Participant as promptly as practicable, but in no event later than 30 days following the Change in Control. The spin-off of Arch Chemicals from Olin Corporation shall not be deemed to be a change of control entitling any Participant herein to benefits under this Plan or the 9 prior Olin Supplemental Contributing Ownership Plan. For purposes of the Plan, a "Change in Control" of the Company shall have occurred in the event that (i) the Company ceases to be, directly or indirectly, owned of record by at least 1,000 stockholders; (ii) a person, partnership, joint venture, corporation or other entity, or two or more of any of the foregoing acting as "person" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Act"), other than the Company, a majority- owned subsidiary of the Company or an employee benefit plan of the Company or such subsidiary (or such plan's related trust), become(s) the "beneficial owner" (as defined in Rule 13d-3 of the Act) of 20% or more of the then outstanding voting stock of the Company; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Company's Board of Directors (together with any new Director whose election by the Company's Board or whose nomination for election by the Company's stockholders, was approved by a vote of at least two-thirds of the Directors of the Company then still in office who either were Directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Directors then in office; or (iv) all or substantially all of the business of the Company is disposed of pursuant to a merger, consolidation or other transaction in which the Company is not the surviving corporation or the Company combines with another company and is the surviving corporation (unless the shareholders of the Company immediately following such merger, consolidation, combination, or other transaction beneficially own, directly or indirectly, more than 50% of the aggregate voting stock or other ownership interests of (x) the entities, if any, that succeed to the business of the Company or (y) the combined company);.or (v) the shareholders of the Company approve a sale of all or substantially all of the assets of the Company or a liquidation or dissolution of the Company For purposes of computing the payout under this Section 7.3, the cash value of the SCEOP Account of a Participant shall be determined by: (i) multiplying the actual number of shares of Arch Common Stock reflected in a Participant's Arch Phantom Units by the greater of (a) the highest Current Market Value of the Common Stock (as defined in the CEOP Plan) on any date within the period commencing thirty (30) days prior to such Change in Control and ending on the date of the Change in Control, or (b) if the Change in Control occurs as a result of a tender or 10 exchange offer or consummation of a corporate transaction, then the highest price paid per share of Common Stock pursuant thereto; (ii) adding any cash portion attributable to a Participant's Arch Phantom Units held in his SCEOP Account; then (iii) adding the then Current Market Value of that portion of a Participant's SCEOP Account which is deemed invested in Olin Phantom Units and Primex Phantom Units (and any other phantom units or stock fund established in the SCEOP). ARTICLE VIII GENERAL PROVISIONS 8.1 The Plan at all times shall be entirely unfunded and no provision shall at any time be made with respect to segregating any assets of the Company for payment of any distribution hereunder. The right of a Participant or his designated Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company, and neither the Participant nor a designated Beneficiary shall have any rights in or against any specific assets of the Company. All amounts credited to the SCEOP Accounts of Participants shall constitute general assets of the Company and may be disposed of by the Company at such time and for such purposes as it may deem appropriate. 8.2 Nothing contained in the Plan shall constitute a guaranty by the Company or any other person or entity that the assets of the Company will be sufficient to pay any benefit hereunder. 8.3 No Participant shall have any right to receive a distribution of contributions made under the Plan except in accordance with the terms of the Plan. Establishment of the Plan shall not be construed to give any Participant the right to be retained in the service of the Company. 8.4 No interest of any person or entity in, or right to receive a distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment or other alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings. 8.5 The Plan shall be construed and administered under the laws of the State of Connecticut, to the extent not preempted by federal law. 8.6 If any person entitled to a distribution under the Plan is deemed by the Company to be incapable of personally receiving and giving a valid receipt for such payment, then, unless and until claim therefor shall have been made by a duly appointed guardian or other legal representative of such person, the Company may provide for such payment or any part thereof to 11 be made to any other person or institution then contributing toward or providing for the care and maintenance of such person. Any such payment shall be a payment for the account of such person and a complete discharge of any liability of the Company and the Plan therefor. 8.7 The Plan shall not be automatically terminated by a transfer or sale of all or substantially all of the assets of the Company or by the merger or consolidation of the Company into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger or consolidation only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event that the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate, subject to the provisions of Section 7.2. 8.8 Each Participant shall keep the Company informed of his current address and the current address of his designated Beneficiary. The Company shall not be obligated to search for the whereabouts of any person. If the location of a Participant is not made known to the Company within three (3) years after the date on which payment of any or all of the Participant's Accounts may first be made, payment may be made as though the Participant had died at the end of the three-year period. If, within one additional year after such three-year period has elapsed, or, within three years after the actual death of a Participant, the Company is unable to locate any designated Beneficiary of the Participant, then the Company shall have no further obligation to pay any benefit hereunder to such Participant or designated Beneficiary and such benefit shall be irrevocably forfeited. 8.9 This Plan shall constitute the entire agreement between the Company and its executives concerning the provision of supplemental CEOP benefits. 8.10 Notwithstanding any of the preceding provisions of the Plan, neither the Company nor any individual acting as employee or agent of the Company shall be liable to any Participant, former Participant or other person for any claim, loss, liability or expense incurred in connection with the Plan. IN WITNESS WHEREOF, Arch Chemicals, Inc. has caused this Plan to be executed by its duly authorized officer as of February 1, 1999. ARCH CHEMICALS, INC. By:_______________________________________ Its 12 EX-10.16 21 SUPPLEMENTARY AND DEFERRAL BENEFIT PENSION PLAN EXHIBIT 10.16 ARCH SUPPLEMENTARY AND DEFERRAL BENEFIT PENSION PLAN Article I. The Plan -------------------- 1.1 Establishment of Plan. Arch Chemicals, Inc. (the "Company" or "Arch") ---------------------- hereby establishes a Supplementary and Deferral Benefit Pension Plan for the benefit of certain salaried employees of Arch and other Employing Companies who may be eligible to participate in the Plan. The Plan is known as the "Arch Supplementary and Deferral Benefit Pension Plan" and is effective February 1, 1999 or, if later, the effective date of the spin-off of Arch from Olin Corporation (the "Effective Date"). For purposes of this Plan, an "Employing Company" means any company which has adopted this Plan and is included within the definition of an Employing Company under the terms of the Arch Chemicals Employees' Pension Plan and any other qualified defined benefit plans maintained by Arch (collectively, the "Qualified Plans"). 1.2 Purpose of Plan. The purpose of this Plan is to provide benefits to ---------------- certain current and former salaried employees of Arch and other Employing Companies whose benefits under the Qualified Plans ("Qualified Plan Benefits") are limited (i) by Section 415 of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) by the limitations on compensation that can be taken into account in calculating qualified plan benefits under Section 401(a)(17) of the Code, and (iii) by the inability to include in compensation for Qualified Plan Benefits any salary and awards of management incentive compensation that have been deferred by Eligible Employees into non-qualified plans or arrangements. These limitations are collectively referred to herein as "Benefit Limitations". This Plan is intended to provide such employees and their Beneficiaries with benefits ("Supplemental Pension Benefits") equal to the difference between what their Qualified Plan Benefits would be absent the Benefit Limitations, and what their Qualified Plan Benefits would be with the imposition of the Benefit Limitations. 1.3 Nature of Plan. This Plan is divisible into two components: that --------------- portion which qualify for the exemption from the Employee Retirement Income Security Act ("ERISA") as an "excess benefit plan", and that portion which provides for benefits in excess of applicable compensation limits, and is intended to be a supplemental executive retirement plan for management and highly compensated employees. Article II. Eligibility ------------------------ 2.1 Any salaried Arch Employee who is eligible to receive a Qualified Plan Benefit from the Company or an Employing Company, the amount of which is reduced by reason of the application of a Benefit Limitation (as previously defined) shall be a Participant in this Plan and be eligible to receive a Supplemental Pension Benefit as provided in this Plan. For purposes of this Plan, an "Arch Employee" includes (i) any employee who is defined as an Arch Employee within the meaning of the Employee Benefits Allocation Agreement dated as of _______________, 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" has the same meaning as that specified in the Distribution Agreement dated ___________________by and between Olin and Arch. 2.2 Assumption of Prior Olin Plan Liabilities for Arch Employees; ------------------------------------------------------------- Transfers of Reserves. In conjunction with establishing this Plan, Arch. hereby - ---------------------- assumes the liabilities of Olin for the provision of benefits to participants who, immediately prior to the Distribution Date (as previously defined) were participants in either or both of the Olin Supplementary Pension Plan or the Olin Deferral Benefit Pension Plan as in effect on the Distribution Date (collectively, the "Olin Supplementary and Deferral Benefit Plan") and who, on and after the Effective Date and before February 1, 2000 transfer to, and become employed by Arch or its affiliated companies. In consideration of such assumption of liability, Olin has transferred, as of the Effective Date, to Arch (or to a rabbi trust established by Arch) the reserves (including any assets held in a rabbi trust or similar vehicle) reflecting the value of the accrued liabilities being transferred, determined in accordance with Olin's established policies and accounting methods, uniformly applied for calculating liabilities under its non-qualified plans. In the event that Olin or its affiliates at any time re-employs any Arch Employee, Olin shall assume the liability under this Plan associated with such re-employed individual and re-enroll such individual in the Olin Supplementary and Deferral Benefit Plan to the extent he or she is then eligible, provided that such employee releases Arch and this Plan from such liability. Article III. Calculation of Benefits. ------------------------------------- 3.1 Amount of Benefit. The Supplemental Pension Benefit payable to a ------------------ Participant retiring on or after his Normal Retirement Date shall be calculated in the form of a single life annuity, commencing at the Participant's Normal Retirement Date (as defined in the Qualified Plans) or, if later, his actual retirement date and shall be a monthly amount equal to the difference between (a) and (b) below: (a) the monthly amount of the Qualified Plan Benefit to which the Participant would have been entitled had such benefit been calculated (i) including non-qualified deferred payments of regular salary and deferred awards under any applicable management incentive plan, and (ii) without regard to the Benefit Limitations imposed by Sections 415 and 401(a)(17) of the Code; and (b) the monthly amount of the Qualified Plan Benefit actually payable to the Participant. The amounts described in (a) shall be calculated as of the date that the Participant terminates service with the Company and all other Employing Companies, in the form of a single life annuity payable over the lifetime of the Participant commencing at his Normal Retirement Date (or, if later, his actual retirement date). 2 For purposes of determining the amount and entitlement to the benefits described in (a) and (b) above, a Participant shall credited with the service, compensation, and accrued benefit that the Participant was credited with under the Olin Supplementary and Deferral Benefit Plan, and Olin qualified defined benefit pension plan(s) as of the Distribution Date, provided however that such crediting shall not occur under this Plan until such employee has released Olin and its affiliates, and the Olin Supplementary and Deferral Benefit Plan, from any liability, or claim for benefits, with respect to the Employee's participation in said plans. 3.2 Transfers between Arch and Olin. It is contemplated that Plan --------------------------------- Participants may transfer their employment after the Distribution Date and before February 1, 2000 from Arch to Olin and vice versa and commence, or ---- ----- resume, participation in the Supplementary and Deferral Benefit Pension Plan(s) of the new employer. (a) Transfer to Olin From Arch. In the event that a Plan Participant --------------------------- transfers employment to Olin prior to February 1, 2000, benefit accrual under this Plan shall cease and Arch shall remain liable for payment of any benefits accrued under this Plan to the date of transfer. No separation from service shall be deemed to occur under this Plan permitting a distribution under this Plan and benefits hereunder shall not commence until the Participant has terminated his employment with Olin and has otherwise qualified for benefits hereunder. When commenced, benefits payable hereunder shall be based upon the Participants service with Arch (and, if applicable, any past service with, and compensation from, Olin and its affiliates recognized as of the Distribution Date), provided, however that Arch shall continue to recognize a Participant's service with Olin and its affiliates subsequent to his transfer to Olin solely for purposes of determining the Participant's vesting and attainment of retirement dates under this Plan. (b) Transfer from Olin to Arch. In the event that an Olin employee --------------------------- transfers employment to Arch from Olin prior to February 1, 2000, benefit accrual under the Olin Supplementary and Deferral Benefit Plan shall cease and Olin shall remain liable for payment of any benefits accrued under those Plans to the employee's date of transfer to Arch. Benefits shall not commence under the Olin Supplementary and Deferral Benefit Plan until the former Olin employee terminates service with Arch and its affiliates and has otherwise qualified for benefits under the Olin Supplementary and Deferral Benefit Plan. Following such transfer, Olin shall continue to credit such employee's service with Arch and its affiliates subsequent to his transfer to Arch solely for purposes of determining his vesting and attainment of retirement dates under the Olin Supplementary and Deferral Benefit Plan. In computing the benefits, and determining attainment of retirement ages under this Plan, Arch shall recognize the compensation received, and service rendered by such Participant while employed by Olin and its affiliates up to the Participant's date of transfer to Arch. When benefits commence under this Pan, they shall be offset by the benefit that would be payable to the Participant from the Olin Supplementary and Deferral Benefit Plan, as of the date benefits commence hereunder, regardless of when such benefit under the Olin Supplementary and Deferral Benefit Plan actually commences. Article IV. Payment of Benefits -------------------------------- 3 4.1. Benefits commencing on or after Reaching Early Retirement Date. --------------------------------------------------------------- (a) A Participant may retire from active service with Arch and all Employing Companies and commence benefits under this Plan at any time after reaching his fifty-fifth (55th) birthday (his "Early Retirement Date"), provided, however, that no election as to the commencement date of benefits under this Plan, including any election under Section 4.4, shall be given effect if not made at least twelve (12) full months prior to the Participant's actual retirement. A Participant may commence benefits under this Plan regardless of the date on which he actually commences benefits under the Arch Chemicals Employees' Pension Plan or other Qualified Plan. (b) For purposes of determining whether a Participant has reached his fifty-fifth (55th) birthday and, thus, is eligible to commence benefits under this Section 4.1(a) instead of on a deferred vested basis, any Participant who has completed at least seven (7) Years of Creditable Service (as defined in the Arch Chemicals Employees' Pension Plan) and who is at least age fifty-two (52), but less than age fifty-five (55) on the date his service is terminated (without taking into account any severance period) other than (i) for cause or (ii) as a result of a voluntary termination, shall be treated as continuing as an eligible Employee until the date on which the Participant reaches age fifty-five (55). A Participant in this Plan shall be credited with his prior service with Olin and its affiliates, as well as his service with Arch, in enabling the Participant to attain his early retirement age under this Plan. A Participant may not commence benefits hereunder until he actually reaches age fifty-five (55). (c) With respect to a Participant retiring from active service on or after reaching his Early Retirement Date, the Plan Administrator will calculate the Participant's retirement benefit then payable from all Arch non-qualified and Qualified Plans using, in the case of the Qualified Plan Benefit, the Benefit Limitations then in effect and based upon the benefit commencement date elected by the Participant for commencement of his qualified and non-qualified plan benefits. In the case of a Participant who elects to defer commencement of his Qualified Plan benefits, the Arch non-qualified pension plans, including this Plan, shall provide for the payment of the Participant's estimated Qualified Plan benefit until such time as the Participant actually commences his qualified plan benefit, at which time the amount of the Participant's non-qualified plan benefit, including the benefits payable from this Plan, shall be reduced dollar for dollar, but not below $0, by the amount of the Qualified Plan benefit ultimately payable to the Participant, based upon the Benefit Limitations in effect when the Participant actually commences receipt of such Qualified Plan benefit. 4.2 Deferred Vested Employees. Any Participant who terminates active ------------------------- service with Arch and all Employing Companies prior to having reached age fifty- five (55), may commence benefits under this Plan at any time after having reached age fifty-five (55); provided, however, that his benefit hereunder shall subject to the actuarial reductions that would be applicable under the Arch Chemicals Employees' Pension Plan. In the event that an Arch Employee is re- employed by Olin prior to February 1, 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 4.3 Payment of Regular Monthly Benefits along with Qualified Plan ------------------------------------------------------------- Benefits. -------- (a) In the event that the Participant (i) does not elect to establish an employee-grantor trust in accordance with Section 4.4(a), (ii) does not elect to receive Accelerated Benefits in accordance with Section 4.4(a), and (iii) elects to commence his benefits under this Plan at the same time that he commences his Qualified Plan Benefit, then the Supplemental Pension Benefit payable hereunder shall be paid commencing at the same time and in the same form as that in which the Qualified Plan Benefit is payable to the Participant. If the Participant elects an actuarially equivalent form of benefit payment with respect to his Qualified Plan Benefit, that same form of payment shall apply to payment of his Supplemental Pension Benefit. Any election to receive regular monthly benefits under this Section 4.3 must be made at least one full year prior to the Participant's Accelerated Benefit Commencement Date. (b) An election by the Participant with respect to the timing and form of this Supplemental Pension Benefit shall be effective only if consented to by the Plan Administrator. If not so approved, then the timing and form of the Supplemental Pension Benefit shall be selected by the Plan Administrator in its sole discretion. (c) A Supplemental Pension Benefit that is payable in any form other than a single life annuity, or which commences at any time prior to the Participant's Normal Retirement Date shall be calculated using the same conversion factors and actuarial adjustments as those specified in the Qualified Plan as of the date that such benefit is being determined. 4.4 Choice of Employee-grantor Trust or Payment of Accelerated Benefits. -------------------------------------------------------------------- (a) As of October 31 of the calendar year following the year in which a Participant meets the Minimum Benefit Accumulation threshold provided for in Section 4.5, the Actuarial Present Value (determined as hereinafter provided) of the after-tax amount of a Participant's Supplemental Pension Benefit shall be deposited in an employee-grantor trust established by the Participant unless, at least one full year prior to the funding of such employee-grantor trust, the Participant shall instead have elected to receive "Accelerated Benefits" as hereinafter provided. (i) If a Participant elects to receive Accelerated Benefits, then the Actuarial Present Value of such Benefits shall be paid, at the election of the Compensation Committee (or its designee), either in a single sum or in up to three (3) annual installments (such single sum or annual installments being referred to in this Plan as "Accelerated Benefits"). (ii) The Participant's Accelerated Benefits shall commence on his Accelerated Benefit Commencement Date, which shall be twelve full months following a Participant's actual retirement date at age fifty-five (55) or later (the "Participant's "Accelerated Benefit Commencement Date"). For purposes of determining whether a Participant has reached his fifty-fifth (55th) birthday and, thus, is eligible to commence benefits under Section 4.1(a) instead of on a deferred vested basis under Section 4.2, Section 4.1(b) shall apply. 5 (b) In the event that an actively employed Participant elects not to establish an employee-grantor trust, but instead to receive Accelerated Benefits, regular monthly benefits shall commence to be paid upon such Participant's actual retirement in accordance with Section 4.1 until such Participant reaches his Accelerated Benefit Commencement Date, at which time Accelerated Benefits shall be paid in the form and manner determined by the Compensation Committee (or its designee), either in a single sum, in up to three (3) annual installments, or in a combination of annuity payments and either a single sum or annual installments (c) In lieu of funding an employee-grantor trust or receiving Accelerated Benefits, the Participant may elect, at least one full year prior to such Accelerated Benefit Commencement Date, to receive benefit payments in an annuity for life in accordance with Section 4.1 of this Plan. 4.5 Assumptions used for Determining Amount to be contributed to Employee- --------------------------------------------------------------------- grantor Trust; Threshold for Accelerated Benefits. -------------------------------------------------- (a) Actuarial Assumptions for Employee-Grantor Trust. In determining the ------------------------------------------------ Actuarial Present Value of the Participant's Plan benefit to be used for purposes of funding an employee-grantor trust, the benefit shall be determined (i) as of the close of the Plan Year (i.e., December 31) prior to the year in which the employee grantor trust is being funded; (ii) using the Code Section 415 limits and 401(a)(17) limits then currently in effect as of the date on which the actuarial present value is being determined o, alternatively, in the discretion of the Plan Administrator, using projected limits, determined based upon reasonable assumptions concerning cost-of-living indices; (iii) using an annuity purchase rate based upon a discount rate equal to the rate for a zero coupon Treasury strip (determined approximately at the time of the deposit to the employee-grantor trust) with a maturity that approximates the Participant's life expectancy determined as of the date the payment to the trust is scheduled to be made; and (iv) assuming that the benefit commences under this Plan (a) on the Participant's 65th birthday, if the Participant terminates service (or is treated as terminating service) prior to age 55; (b) on the Participant's 62nd birthday, if the Participant terminates service on or after reaching age 55 and before reaching age 62; and (c) on the Participant's 65th birthday, if the Participant terminates service on or after reaching age 62. 6 (b) Actuarial Assumptions for Determining Accelerated Benefits. In ---------------------------------------------------------- determining the Actuarial Present Value of the Participant's Accelerated Benefit, the benefit shall be determined (i) as of the close of the Participant's retirement or termination of service; and (ii) using an annuity purchase rate based upon a discount rate equal to the rate for a zero coupon Treasury strip (determined approximately at the time that Accelerated Benefits are scheduled to commence) with a maturity that approximates the Participant's life expectancy determined as of the date the payment is scheduled to be made. (c) Minimum Benefit Accumulation Threshold. No Accelerated Benefits shall --------------------------------------- commence to be paid, and no Participant shall be given the opportunity to fund an employee-grantor trust, until the Participant has accumulated benefits under this Plan, and the Arch Senior Executive Pension Plan which, in the aggregate, have an actuarial present value of at least One Hundred Thousand Dollars ($100,000.00). 4.6 Death Benefits. --------------- (a) The Beneficiary of a Participant who dies after commencing regular ----- monthly benefits under Section 4.1 of this Plan shall receive a death benefit under this Plan only if the form selected by, or in force with respect to, the Participant under the Qualified Plan provides for a death benefit. For purposes of this Plan, a Participant's Beneficiary shall be the Beneficiary designated to receive death benefits under the Qualified Plan. (b) The Beneficiary of a Participant who dies after having elected to receive Accelerated Benefits, but who as of the date of his death has not received the entire value of his Accelerated Benefits, shall receive the remainder of any Accelerated Benefits not yet paid in the form of payment in effect with respect to the Participant. (c) If a Participant dies prior to commencement of his Qualified Plan Benefits under circumstances in which a pre-retirement survivor annuity is payable under the Qualified Plan, then a supplemental surviving Spouse benefit shall be payable under this Plan in a monthly amount that shall be equal to the difference between (i) the monthly amount of the Qualified pre-retirement survivor benefit to which the surviving Spouse would have been entitled under the Qualified Plan had such benefit been calculated (i) including non- qualified deferred payments of regular salary and deferred awards under the management incentive plan, and (ii) without regard to the Benefit Limitations imposed by Sections 415 and 401(a)(17) of the Code; and 7 (ii) the monthly amount of the Qualified pre-retirement survivor benefit that is actually payable to the surviving Spouse. (d) For purposes of this Plan, the term "Spouse" shall mean the person to whom a Participant is validly married at the date of his death, as evidenced by a marriage certificate issued in accordance with state law; provided however, that (i) if a Participant's Spouse at his or her death was not the Participant's Spouse at least 12 months prior to the Participant's death, no Surviving Spouse's retirement allowance shall be paid, and (ii) common law marriages shall not be recognized hereunder. 4.7 Benefit Upon a Change of Control. -------------------------------- (a) Lump Sum Payment Upon a Change of Control. ----------------------------------------- The spin-off of Arch from Olin shall not be deemed to be a change of control entitling any Participant herein to benefits under this Plan or the Olin Supplementary and Deferral Benefit Plan. Notwithstanding any other provision of the Plan, upon a Change in Control as defined in 4.7(c), each Participant covered by the Plan shall automatically be paid a lump sum amount in cash by the Company sufficient to purchase an annuity which, together with the monthly payment, if any, under a Rabbi or other trust arrangement established by the Company to make payments hereunder in the event of a Change in Control and/or pursuant to any other annuity purchased by the Company for the Participant to make payments hereunder, shall provide the Participant with the same monthly after-tax benefit as he would have received under the Plan based on the benefits accrued to the Participant hereunder as of the date of the Change in Control. Payment under this Section shall not in and of itself terminate the Plan, but such payment shall be taken into account in calculating benefits under the Plan which may otherwise become due the Participant thereafter. (b) No Divestment Upon a Change of Control. If a Participant is removed -------------------------------------- from participation in the Plan after a Change of Control has occurred, in no event shall his years of Benefit Service accrued prior to such removal, and the benefit accrued prior thereto, be adversely affected. (c) Change of Control Defined. ------------------------- For purposes of the Plan, a "Change in Control" of the Company shall have occurred in the event that (i) the Company ceases to be, directly or indirectly, owned of record by at least 1,000 stockholders; (ii) a person, partnership, joint venture, corporation or other entity, or two or more of any of the foregoing acting as "person" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Act"), other than the 8 Company, a majority-owned subsidiary of the Company or an employee benefit plan of the Company or such subsidiary (or such plan's related trust), become(s) the "beneficial owner" (as defined in Rule 13d-3 of the Act) of 20% or more of the then outstanding voting stock of the Company; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Company's Board of Directors (together with any new Director whose election by the Company's Board or whose nomination for election by the Company's stockholders, was approved by a vote of at least two-thirds of the Directors of the Company then still in office who either were Directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Directors then in office; or (iv) all or substantially all of the business of the Company is disposed of pursuant to a merger, consolidation or other transaction in which the Company is not the surviving corporation or the Company combines with another company and is the surviving corporation (unless the shareholders of the Company immediately following such merger, consolidation, combination, or other transaction beneficially own, directly or indirectly, more than 50% of the aggregate voting stock or other ownership interests of (x) the entities, if any, that succeed to the business of the Company or (y) the combined company);.or (v) the shareholders of the Company approve a sale of all or substantially all of the assets of the Company or a liquidation or dissolution of the Company. (d) Arbitration. Any dispute or controversy arising under or in ----------- connection with the Plan subsequent to a Change in Control shall be settled exclusively by arbitration in Connecticut, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. Article V. Funding ------------------ 5.1 Unfunded Plan. This Plan shall be unfunded. All payments under this ------------- Plan shall be made from the general assets of the Employing Company of the Participant. No provision shall at any time be made with respect to segregating any assets of Arch or another Employing Company for payment of benefits hereunder. No Participant, surviving Spouse or any other Beneficiary shall have any interest in any particular assets of an Employing Company by reason of the right to receive a benefit under this Plan and shall have the rights only of a general unsecured creditor of Employing Company with respect to any rights under the Plan. 5.2 Liability for Payment. Each Employing Company shall pay the benefits --------------------- provided under this Plan with respect to Participants who are employed, or were formerly employed by it during their participation in the Plan. In the case of a Participant who was employed by more 9 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 Benefit Plan ------------------- Review Committee as the Plan Administrator (the "Plan Administrator" or "Committee"). Any person, including, but not limited to, the directors, shareholders, officers and employees of the Company, shall be eligible to serve on the Committee. Any person so appointed shall signify his acceptance by undertaking the duties assigned. Any member of the Committee may resign by delivering written resignation to the Company. The Company may also remove any member of the Committee by delivery of a written notice of removal, which shall take effect upon delivery or on a date specified. Upon resignation or removal of a Committee member, the Company shall promptly designate in writing such other person or persons as a successor. 6.2 Allocation and Delegation. The Committee members may allocate the ------------------------- responsibilities among themselves, and shall notify the Company in writing of such action and the responsibilities allocated to each member. 6.3 Powers, Duties and Responsibilities. Except for those powers ----------------------------------- expressly reserved to the Selection Committee, the Plan Administrator shall have all power to administer the Plan for the exclusive benefit of the Participants and their Beneficiaries, in accordance with the terms of the Plan. The Plan Administrator shall have the absolute discretion and power to determine all questions arising in connection with the administration, interpretation and application of the Plan. Any such determination by the Plan Administrator shall be conclusive and binding upon all persons. The Plan Administrator may correct any defect or reconcile any inconsistency in such manner and to such extent as shall be deemed necessary or advisable to carry out the purposes of the Plan; provided, however, that such interpretation or construction shall be done in a non-discriminatory manner and shall be consistent with the intent of the Plan. The Plan Administrator shall: (a) compute the amount and kind of benefits to which any Participant shall be entitled hereunder; (b) maintain all necessary records for the administration of the Plan; (c) interpret the provisions of the Plan and make and publish such rules for regulation of the Plan as are consistent with the terms hereof; 10 (d) assist any Participant regarding his rights, benefits or elections available under the Plan; and (e) communicate to Participants and their Beneficiaries concerning the provisions of the Plan. 6.4 Records and Reports. The Plan Administrator shall keep a record of -------------------- all actions taken and shall keep such other books of account, records and other information that may be necessary for proper administration of the Plan. The Plan Administrator shall file and distribute all reports that may be required by the Internal Revenue Service, Department of Labor or others, as required by law. 6.5 Appointment of Advisors. The Plan Administrator may appoint ------------------------ accountants, actuaries, counsel, advisors and other persons that it deems necessary or desirable in connection with the administration of the Plan. 6.6 Majority Actions. The Committee shall act by a majority of their ---------------- numbers, but may authorize one or more of them to sign all papers on their behalf. 6.7 Indemnification of Members. The Company shall indemnify and hold --------------------------- harmless any member of the Committee and of the Compensation Committee from any liability incurred in his or her capacity as such for acts which he or she undertakes in good faith as a member of such Committee. 6.8 Construction of Plan Terms. Except as otherwise expressly provided in --------------------------- this Plan, all terms and conditions of the Qualified Plan shall be applicable to a Supplemental and Deferral Pension Benefit payable hereunder. Article VII. Termination and Amendment -------------------------------------- 7.1 Amendment or Termination. The Company may amend or terminate the Plan ------------------------ at any time, in whole or in part, by action of its Board of Directors, the Compensation Committee of the Board, or any other duly authorized committee or officer. Any Employing Company may withdraw from participation in the Plan at any time. No amendment or termination of the Plan or withdrawal therefrom by an Employing Company shall adversely affect the vested benefits payable hereunder to any Participant for service rendered prior to the effective date of such amendment, termination or withdrawal. Article VIII. Miscellaneous ---------------------------- 8.1 Gender and Number. Whenever any words are used herein in the ----------------- masculine, feminine or neuter gender, they shall be construed as though they were also used in another 11 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 1, 1999. Dated: ARCH CHEMICALS, INC. By_________________________________ Its 12 EX-10.17 22 SENIOR EXECUTIVE PENSION PLAN EXHIBIT 10.17 ARCH SENIOR EXECUTIVE PENSION PLAN Article I. The Plan -------------------- 1.1 Establishment of Plan. Arch Chemicals, Inc. (the "Company" or ---------------------- "Arch") hereby establishes a non-qualified deferred compensation plan known as the Arch Senior Executive Pension Plan for the benefit of certain salaried employees of Arch and other Employing Companies who may be eligible to participate. The Plan is effective February 1, 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 _______________, 1999 by and between Arch and Olin Corporation ("Olin"), as well as (ii) any salaried employee hired by Arch after the Effective Date of this Plan. The term "Distribution Date" has the same meaning as that specified in the Distribution Agreement dated as of __________________, 1999 by and between Olin and Arch. 2.2 Assumption of Prior Olin Plan Liabilities for Arch Employees; ------------------------------------------------------------- Transfers of Reserves. In conjunction with establishing this Plan, Arch. - ---------------------- hereby assumes the liabilities of Olin for the provision of benefits to participants who, immediately prior to -1- the Distribution Date (as previously defined) were participants in the Olin Senior Executive Pension Plan as in effect on the Distribution Date (the "Olin Senior Plan") and who, on and after the Effective Date and before February 1, 2000 transfer to, and become employed by Arch or its affiliated companies. In consideration of such assumption of liability, Olin has transferred, as of the Effective Date, to Arch (or to a rabbi trust established by Arch) the reserves (including any assets held in a rabbi trust or similar vehicle) reflecting the value of the accrued liabilities being transferred, determined in accordance with Olin's established policies and accounting methods, uniformly applied for calculating liabilities under its non-qualified plans. In the event that Olin or its affiliates re-employs any Arch Employee before February 1, 2000, Olin shall assume the liability under this Plan associated with such re-employed individual and re-enroll such individual in the Olin Senior Plan to the extent he or she is then eligible, provided that such employee releases Arch and this Plan from such liability. Article III. Benefits --------------------- 3.1 Benefit Formula. As of the Distribution Date, each Eligible --------------- Employee who, immediately prior to the Distribution Date, was a participant in the Olin Senior Plan, shall be credited in this Plan with an accrued benefit equal to that credited to such individual under the Olin Senior Plan as of the Distribution Date (based upon the Eligible Employee's Average Compensation and service with Olin), provided however that such crediting shall not occur under this Plan until such employee has released Olin and its affiliates, and the Olin Senior Plan, from any liability, or claim for benefits, with respect to the Employee's participation in said plan. Upon retirement, as hereinafter provided, a Participant shall be entitled to receive an annual "Retirement Allowance" equal to the lesser of (a) and (b) ------------- below: (a) three percent (3%) of the Participant's Average Compensation, multiplied by the sum of his Years of Benefit Service credited while the employee was a Participant in this Plan and, prior to this Plan, the Olin Senior Plan, plus one and one-half percent (1 1/2%) of the Participant's Average Compensation multiplied by his aggregate Years of Benefit Service credited under all qualified defined benefit plans of Arch which includes Years of Benefit Service credited under the Olin Employees Pension Plan while the employee was not a Participant in either this Plan or the prior Olin Senior Plan, provided that the resulting percentage of Average Compensation shall be reduced by one-third of one percent (1/3%) for each month by which the Participant's benefits under this Plan begin prior to his sixty-second (62nd) birthday; reduced by the sum of (i) the Participant's annual retirement allowance payable from all Arch Qualified Plans and any other nonqualified defined benefit pension plans -2- of the Company and all Employing Companies, including, without limitation, the Arch Chemicals Employees' Pension Plan), and the equivalent actuarial value of any other arrangement with the Company or an Employing Company which the Plan Administrator, in its sole discretion, determines to be a pension supplement (collectively referred to hereinafter as the "Other Arch Plans"); plus (ii) fifty percent (50%) of the Participant's Primary Social Security Benefit. (b) fifty percent (50%) of the Participant's Average Compensation, reduced by the sum of (i) the amount of annual retirement benefits from the Arch Chemicals Employees' Pension Plan and all Other Arch Plans (as previously defined) and all qualified and non-qualified deferred compensation plans of the Participant's previous and subsequent employers; and (ii) fifty percent (50%) of the Participant's Primary Social Security Benefit. (c) For purposes of determining a Participant's "Average Compensation", "Years of Benefit Service", "Retirement Allowance" and "Primary Social Security Benefit" under this Plan, such terms shall have the same meaning as that contained in the Arch Chemicals Employees' Pension Plan and shall include credit for the compensation received, and service rendered by such Participant while employed by Arch and its affiliates, as well as by Olin and its affiliates up through the Distribution Date (or through January 31, 2000 in the case of Participants transferring from Olin pursuant to Section 3.5). In calculating a Participant's Average Compensation under this Plan, (i) "Average Compensation" under this Plan shall also include deferred amounts of regular salary and deferrals under management incentive plans (other than the Performance Unit Plan, the EVA Bonus Bank or similar bonus bank arrangements, and other long-term incentive and long-term bonus plans of Olin and Arch); (ii) executive severance which is payable to certain Participants under employment agreements shall be treated as if paid over the number of months of salary used to calculate the amount of such severance, even if such severance is received in a lump sum; (iii) Average Compensation shall be calculated without regard to the dollar limitations imposed by Section 401(a)(17) of the Internal Revenue Code; and (iv) "Years of Benefit Service" shall include service imputed as a result of treating any executive severance paid as having been received over the number of months of salary used to calculate such severance. (d) The annual retirement allowances payable under the Arch Chemicals Employees' Pension Plan, Other Arch Plans and from pension plans of the -3- Participant's previous employers, which are to be used to reduce the benefit payable under (a) or (b) above, shall be determined assuming (i) that the Participant selected a 50% joint and survivor annuity under such plans, (ii) began receiving benefits thereunder at their actual commencement date (rather than the commencement date for benefits under this Plan), and (iii) using the actuarial equivalent factors specified in the plans which are the subject of the offset or, if such factors are not reasonably available, such factors as may, from time to time, be elected by the Plan Administrator. 3.2 Early Retirement. ---------------- (a) Except as otherwise provided in Section 4.2(a), a Participant may retire from active service with Arch and all Employing Companies and commence benefits under this Plan at any time after reaching his fifty-fifth (55th) birthday, provided, however, that Accelerated Benefits may not commence until at least twelve (12) full months following the Participant's actual retirement. (b) For purposes of (i) determining whether a Participant has reached his fifty- fifth (55th) birthday and, thus, is eligible to commence benefits under this Section 3.2 instead of on a deferred vested basis, and (ii) calculating the annual retirement allowance from the Arch Chemicals Employees' Pension Plan which is to be used as an offset, any Participant who has completed at least seven (7) Years of Creditable Service (as defined in the Arch Chemicals Employees' Pension Plan) and who is at least age fifty-two (52), but less than age fifty-five (55) on the date his service is terminated (without taking into account any severance period) other than (i) for cause or (ii) as a result of a voluntary termination, shall be treated as continuing as an eligible Employee until the date on which the Participant reaches age fifty-five (55). A Participant in this Plan shall be credited with his prior service with Olin and its affiliates, as well as Arch and its affiliates, in enabling the Participant to attain his early retirement age under this Plan. No Benefit Service shall be credited under this Section 3.2(b) and a Participant may not commence benefits hereunder until he actually reaches age fifty-five (55). 3.3 Deferred Vested Employees. Any Participant who terminates active service ------------------------- with Arch and all Employing Companies prior to having reached age fifty-five (55) may commence benefits under this Plan only after having reached age sixty- five (65). In the case of a deferred vested Participant, benefits paid from this Plan will assume that the Participant did not commence benefits under the Arch Chemicals Employees' Pension Plan until he or she reached age sixty-five (65), even though the Participant may actually commence benefits under the Arch Chemicals Employees' Pension Plan prior to that date. In the event that an Arch Employee is re-employed by Olin prior to February 1, 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. -4- 3.4 Calculation of Benefit if Participant is Disabled. In the event that ------------------------------------------------- a Participant becomes Totally Disabled as that term is defined in the Arch Chemicals Employees' Pension Plan, the Participant shall continue to receive the same service credit under this Plan as would be applicable to Totally Disabled nonbargaining employees covered by the Arch Chemicals Employees' Pension Plan. The disabled Participant's benefit under this Plan shall be calculated in accordance with 3.1(a) and (b), and shall be payable as of the date that the Participant is no longer Totally Disabled (if such date occurs after age fifty- five (55)) or at age sixty-five (65), if the Employee is still then Disabled. If a Participant is no longer Disabled prior to reaching age fifty-five (55), then his entitlement to benefits shall be determined under Section 3.3, if he terminates service prior to reaching age 55, or under the other applicable provisions of this Plan, if he returns to active service. No Participant shall qualify for Disability Benefits hereunder once he or she is no longer actively employed by Arch, Inc. or its affiliates. 3.5 Transfers between Arch and Olin. It is contemplated that Plan --------------------------------- Participants may transfer their employment after the Distribution Date and before February 1, 2000 from Arch to Olin and vice versa and commence, or ---- ----- resume, participation in the Senior Executive Pension Plan of the new employer. (a) Transfer to Olin From Arch. In the event that a Plan Participant --------------------------- transfers employment to Olin prior to February 1, 2000, benefit accrual under this Plan shall cease and Arch shall remain liable for payment of any benefits accrued under this Plan to the date of transfer. As provided in Section 3.3, no separation from service shall be deemed to occur under this Plan permitting a distribution under this Plan and benefits hereunder shall not commence until the Participant has terminated his employment with Olin and has otherwise qualified for benefits hereunder. When commenced, benefits payable hereunder shall be based upon the Participants service with Arch (and, if applicable, any past service with, and compensation from, Olin and its affiliates recognized as of the Distribution Date), provided, however that Arch shall continue to recognize a Participant's service with Olin and its affiliates subsequent to his transfer to Olin solely for purposes of determining the Participant's vesting and attainment of retirement dates under this Plan. (b) Transfer from Olin to Arch. In the event that an Olin employee --------------------------- transfers employment to Arch from Olin prior to February 1, 2000, benefit accrual under the Olin Senior Plan shall cease and Olin shall remain liable for payment of any benefits accrued under the Olin Senior Plan to the employee's date of transfer to Arch. Benefits shall not commence under the Olin Senior Plan until the former Olin employee terminates service with Arch and its affiliates and has otherwise qualified for benefits under the Olin Senior Plan. Following such transfer, Olin shall continue to credit such employee's service with Arch and its affiliates subsequent to his transfer to Arch solely for purposes of determining his vesting and attainment of retirement dates under the Olin Senior Plan. In computing the benefits, and determining attainment of retirement ages under this Plan, Arch shall recognize the compensation received, and service rendered by such Participant while employed by Olin and its affiliates up to the Participant's date of transfer to Arch. When benefits commence under this Pan, they shall be offset by the benefit that would be -5- payable to the Participant from the Olin Senior Plan, as of the date benefits commence hereunder, regardless of when such benefit under the Olin Senior Plan actually commences. Article IV. Payment of Benefits -------------------------------- 4.1 Payment of Benefits; in General. ------------------------------- In the event that the Participant (i) does not elect to establish an employee-grantor trust in accordance with Section 4.2(a), (ii) does not elect to receive Accelerated Benefits in accordance with Section 4.2(a), and (iii) elects to commence his benefits under this Plan at the same time that he commences his Qualified Plan Benefit, then the Retirement Allowance payable hereunder shall be paid commencing at the same time and in the same form as that in which the Qualified Plan Benefit is payable to the Participant. If the Participant elects an actuarially equivalent form of benefit payment with respect to his Qualified Plan Benefits, that same form of payment shall apply to payment of his Retirement Allowance hereunder. Any election to receive regular monthly benefits under this Section 4.3 must be made at least one full year prior to the Participant's Accelerated Benefit Commencement Date. 4.2 Payment Provisions for Active Employees. ---------------------------------------- (a) As of October 31 of the calendar year following the year in which an actively employed Participant meets the Minimum Benefit Accumulation threshold provided for in Section 4.4(c), the Actuarial Present Value (determined as hereinafter provided) of the after-tax amount of an actively employed Participant's Retirement Allowance shall be deposited in an employee-grantor trust established by the Participant unless, at least one full year prior to the funding of such employee-grantor trust, the Participant shall instead have elected to receive Accelerated Benefits commencing on his Accelerated Benefit Commencement Date. In the case of an actively employed Participant, the "Accelerated Benefit Commencement Date" shall be twelve full months following his actual retirement date at age fifty-five (55) or later. (b) In the event that an actively employed Participant elects not to establish an employee-grantor trust, but instead to receive Accelerated Benefits, regular monthly benefits shall commence to be paid upon such Participant's actual retirement in accordance with Section 4.3 until such Participant reaches his Accelerated Benefit Commencement Date, at which time Accelerated Benefits shall be paid in the form and manner determined by the Compensation Committee (or its designee), either in a single sum, in up to three (3) annual installments, or in a combination of annuity payments and either a single sum or annual installments (c) Alternatively, the actively employed Participant may elect, at least one full year prior to such Accelerated Benefit Commencement Date, to receive his entire benefit in the form of an annuity in accordance with Section 4.3 of this Plan. -6- 4.3 Payment of Regular Monthly Benefits. ------------------------------------ (a) Participants retiring from active service from Arch and all Employing Companies may elect to receive regular monthly benefits in lieu of receiving Accelerated Benefits or establishing an employee-grantor trust. Such monthly benefits shall be calculated and payable (without reduction for the death benefit protection) in the form of a joint and 50% survivor annuity with the Participant's Spouse as the joint annuitant. (b) Any Participant who terminates service with Arch and all Employing Companies before reaching age 55 may not commence benefits under this Plan prior to reaching age 65 unless he is eligible for "lay-off credit" pursuant to Section 3.2(b) and, thus, is deemed to qualify for early retirement benefits. Any benefits payable under this Plan with respect to a Participant who terminates service prior to reaching age 55, and who is not eligible for any imputed service under the lay-off provisions of Section 3.2(b), will be calculated assuming that the Participant did not commence benefits under the Arch Chemicals Employees' Pension Plan until reaching age 65, even though his actual commencement date under the Arch Chemicals Employees' Pension Plan may have been earlier. 4.4 Assumptions used for Determining Amount to be contributed to Employee- --------------------------------------------------------------------- grantor Trust; Threshold for Accelerated Benefits. -------------------------------------------------- (a) Actuarial Assumptions for Employee-Grantor Trust. In determining the ------------------------------------------------ Actuarial Present Value of the Participant's Plan benefit to be used for purposes funding an employee-grantor trust, the benefit shall be determined: (i) as of the close of the Plan Year (i.e., December 31) prior to the year in which the employee grantor trust is being funded; (ii) using an annuity purchase rate based upon a discount rate equal to the rate for a zero coupon Treasury strip (determined approximately at the time of the deposit to the employee-grantor trust) with a maturity that approximates the Participant's life expectancy determined as of the date the payment to the trust is scheduled to be made; and (iii) assuming that the benefit commences under this Plan (a) on the Participant's 65th birthday, if the Participant terminates service (or is treated as terminating service) prior to age 55; (b) on the Participant's 62nd birthday, if the Participant terminates service on or after reaching age 55 and before reaching age 62; and -7- (c) on the Participant's 65th birthday, if the Participant terminates service on or after reaching age 62. (b) Actuarial Assumptions for Determining Accelerated Benefits. In ---------------------------------------------------------- determining the Actuarial Present Value of the Participant's Accelerated Benefit, the benefit shall be determined: (i) as of the close of the Participant's retirement or termination of service; (ii) using an annuity purchase rate based upon a discount rate equal to the rate for a zero coupon Treasury strip (determined approximately at the time the Accelerated Benefit is scheduled to commence) with a maturity that approximates the Participant's life expectancy determined as of the date the payment is scheduled to be made; and (iii) assuming that the benefit commences under this Plan (a) on the Participant's 65th birthday, if the Participant terminates service (or is treated as terminating service) prior to age 55; (b) on the Participant's 62nd birthday, if the Participant terminates service on or after reaching age 55 and before reaching age 62; and (c) on the Participant's 65th birthday, if the Participant terminates service on or after reaching age 62. (c) Minimum Benefit Accumulation Threshold. No Accelerated Benefits shall --------------------------------------- commence to be paid, and no Participant shall be given the opportunity to fund an employee-grantor trust, until the Participant has accumulated benefits under this Plan, the Arch Supplementary and Deferral Benefit Pension Plan which, in the aggregate, have an actuarial present value of at least One Hundred Thousand Dollars ($100,000.00). 4.5 Surviving Spouse Benefit. ------------------------- (a) The Surviving Spouse of a Participant who dies after commencing ----- regular monthly benefits shall receive a survivor benefit for his or her lifetime equal to 50% of the monthly payments that were being paid to the Participant under the Plan as of his death. (b) The Surviving Spouse of a Participant who dies after having elected to receive Accelerated Benefits, but who as of the date of his death has not received the entire value of his Accelerated Benefits, shall receive the remainder of any Accelerated Benefits not yet paid in the form of payment in effect with respect to the Participant. (c) The Surviving Spouse of any Participant who dies prior to benefit ----- commencement shall be entitled to receive a benefit equal to 50% of the benefit that the Participant would -8- have been entitled to had he survived to the earliest date on which he could commence benefits hereunder, retired and commenced monthly regular benefits under the Plan, and then died the next day. (d) Notwithstanding (a) -(c) above, if the Surviving Spouse is more than four years younger than the Participant, the Surviving Spouse's benefit under this Plan shall be reduced so that the present value of the spouse's lifetime benefit, as determined by the Company, is the same as it would have been if he or she were only four years younger than the Participant. (e) For purposes of this Plan, the term "Spouse" shall mean the person to whom a Participant is validly married at the date of his death, as evidenced by a marriage certificate issued in accordance with state law; provided however, that (i) if a Participant's Spouse at his or her death was not the Participant's Spouse at least 12 months prior to the Participant's death, no Surviving Spouse's retirement allowance shall be paid, and (ii) common law marriages shall not be recognized hereunder. 4.6 Benefit Upon a Change of Control. -------------------------------- (a) Lump Sum Payment Upon a Change of Control. ----------------------------------------- The spin-off of Arch from Olin shall not be deemed to be a change of control entitling any Participant herein to benefits under this Plan or the prior Olin Senior Plan. Notwithstanding any other provision of the Plan, upon a Change in Control, each Participant covered by the Plan shall automatically be paid a lump sum amount in cash by the Company sufficient to purchase an annuity which, together with the monthly payment, if any, under a Rabbi or other trust arrangement established by the Company to make payments hereunder in the event of a Change in Control and/or pursuant to any other annuity purchased by the Company for the Participant to make payments hereunder, shall provide the Participant with the same monthly after-tax benefit as he would have received under the Plan based on the benefits accrued to the Participant hereunder as of the date of the Change in Control. Payment under this Section shall not in and of itself terminate the Plan, but such payment shall be taken into account in calculating benefits under the Plan which may otherwise become due the Participant thereafter. (b) No Divestment Upon a Change of Control. If a Participant is removed -------------------------------------- from participation in the Plan after a Change of Control has occurred, in no event shall his years of Benefit Service accrued prior to such removal, and the benefit accrued prior thereto, be adversely affected. (c) Change of Control Defined. ------------------------- For purposes of the Plan, a "Change in Control" of the Company shall have occurred in the event that -9- (i) the Company ceases to be, directly or indirectly, owned of record by at least 1,000 stockholders; (ii) a person, partnership, joint venture, corporation or other entity, or two or more of any of the foregoing acting as "person" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Act"), other than the Company, a majority- owned subsidiary of the Company or an employee benefit plan of the Company or such subsidiary (or such plan's related trust), become(s) the "beneficial owner" (as defined in Rule 13d-3 of the Act) of 20% or more of the then outstanding voting stock of the Company; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Company's Board of Directors (together with any new Director whose election by the Company's Board or whose nomination for election by the Company's stockholders, was approved by a vote of at least two-thirds of the Directors of the Company then still in office who either were Directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Directors then in office; or (iv) all or substantially all of the business of the Company is disposed of pursuant to a merger, consolidation or other transaction in which the Company is not the surviving corporation or the Company combines with another company and is the surviving corporation (unless the shareholders of the Company immediately following such merger, consolidation, combination, or other transaction beneficially own, directly or indirectly, more than 50% of the aggregate voting stock or other ownership interests of (x) the entities, if any, that succeed to the business of the Company or (y) the combined company);.or (v) the shareholders of the Company approve a sale of all or substantially all of the assets of the Company or a liquidation or dissolution of the Company. (d) Arbitration. Any dispute or controversy arising under or in ----------- connection with the Plan subsequent to a Change in Control shall be settled exclusively by arbitration in Connecticut, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 4.7 Removal from the Plan; Non-Payment of Benefits. ----------------------------------------------- (a) Any Participant may be removed from the Plan by the Compensation Committee at any time "for cause", as determined by the Compensation Committee in its sole discretion, whether or not the Participant has begun to receive payments under the Plan, and whether or not the Participant's employment has been terminated. "Cause" shall -10- include, without limitation, rendering services in any capacity to a competitor of the Company or Employing Company without the consent of the Compensation Committee. Neither the Participant nor his or her Spouse shall be entitled to receive any payments from the Plan from and after the date of the removal of the Participant nor have any cause of action as a result of such removal. The Participant or Spouse shall not be required to return any payments made prior to removal of the Participant from the Plan. (b) The Compensation Committee may notify a Participant that he or she is being suspended from the Plan as a result of job performance which the Compensation Committee in its sole discretion deems unsatisfactory. From and after the date of such notification and notwithstanding the Participant's actual Hay Points, he or she will not be deemed to have 2,000 or more Hay Points for purposes of calculating the Participant's Retirement Allowance. Any prior Years of Benefit Service shall not be affected by such suspension. Article V. Funding ------------------ 5.1 Unfunded Plan. This Plan shall be unfunded. All payments under ------------- this Plan shall be made from the general assets of Arch and other Employing Companies. 5.2 Liability for Payment. Arch and each other Employing Company --------------------- shall pay the benefits provided under this Plan with respect to Participants who are employed, or were formerly employed by it during their participation in the Plan. In the case of a Participant who was employed by more than one Employing Company, the Committee shall allocate the cost of such benefits among such Employing Companies in such manner as it deems equitable. The obligations of the Employing Company shall not be funded in any manner. The rights of any person to receive benefits under this Plan are limited to those of a general creditor of the Employing Company liable for payment hereunder. 5.3 Anti-alienation. No Participant or beneficiary shall have the --------------- right to assign, transfer, encumber or otherwise subject to any lien any payment or any other interest under this Plan, nor shall such payment or interest be subject to attachment, execution or levy of any kind. Article VI. Plan Administration ------------------------------- 6.1 Plan Administrator. The Company hereby appoints the Benefit Plan ------------------- 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 -11- 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 in such manner and to such extent as shall be deemed necessary or advisable to carry out the purposes of the Plan; provided, however, that such interpretation or construction shall be done in a non-discriminatory manner and shall be consistent with the intent of the Plan. The Plan Administrator shall: (a) compute the amount and kind of benefits to which any Participant shall be entitled hereunder; (b) maintain all necessary records for the administration of the Plan; (c) interpret the provisions of the Plan and make and publish such rules for regulation of the Plan as are consistent with the terms hereof; (d) assist any Participant regarding his rights, benefits or elections available under the Plan; and (e) communicate to Participants and their Beneficiaries concerning the provisions of the Plan. 6.4 Records and Reports. The Plan Administrator shall keep a record -------------------- of all actions taken and shall keep such other books of account, records and other information that may be necessary for proper administration of the Plan. The Plan Administrator shall file and distribute all reports that may be required by the Internal Revenue Service, Department of Labor or others, as required by law. -12- 6.5 Appointment of Advisors. The Plan Administrator may appoint ------------------------ accountants, actuaries, counsel, advisors and other persons that it deems necessary or desirable in connection with the administration of the Plan. 6.6 Majority Actions. The Committee shall act by a majority of their ---------------- numbers, but may authorize one or more of them to sign all papers on their behalf. 6.7 Indemnification of Members. The Company shall indemnify and hold --------------------------- harmless any member of the Committee and of the Compensation Committee from any liability incurred in his or her capacity as such for acts which he or she undertakes in good faith as a member of such Committee. Article VII. Termination and Amendment -------------------------------------- 7.1 Amendment or Termination. The Company may amend or terminate the ------------------------ Plan at any time, in whole or in part, by action of its Board of Directors, the Compensation Committee of the Board or any other duly authorized committee or officer. Any Employing Company may withdraw from participation in the Plan at any time. No amendment or termination of the Plan or withdrawal therefrom by an Employing Company shall adversely affect the vested benefits payable hereunder to any Participant for service rendered prior to the effective date of such amendment, termination or withdrawal. Article VIII. Miscellaneous ---------------------------- 8.1 Gender and Number. Whenever any words are used herein in the ----------------- masculine, feminine or neuter gender, they shall be construed as though they were also used in another gender in all cases where such would apply, and whenever any words are used herein in the singular or plural form, they shall be construed as though they were also used in another form in all cases where they would so apply. 8.2 Action by the Company. Whenever the Company under the terms of --------------------- this Plan is permitted or required to do or perform any act or thing, it shall be done and performed by an officer or committee duly authorized by the Board of Directors of the Company. 8.3 Headings. The headings and subheadings of this Plan have been --------- inserted for convenience of reference only and shall not be used in the construction of any of the provisions hereof. 8.4 Uniformity and Non Discrimination. All provisions of this Plan ---------------------------------- shall be interpreted and applied in a uniform nondiscriminatory manner. -13- 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 1, 1999. ARCH CHEMICALS, INC. By:_____________________________________ Its -14- EX-10.18 23 EMPLOYEE DEFERRAL PLAN Exhibit 10.18 ARCH CHEMICALS, INC. EMPLOYEE DEFERRAL PLAN 1. PURPOSE ------- The purpose of this Arch Chemicals, Inc. Employee Deferral Plan (the "Plan") is to provide eligible employees of Arch Chemicals, Inc. and its subsidiaries and affiliates with an opportunity to defer compensation earned or to be earned by them as a means of saving for retirement or other future purposes. 2. DEFINITIONS ----------- The following definitions shall be applicable throughout the Plan: (a) "Accounting Date" means each December 31, March 31, June 30 and September 30. (b) "Administrator" means the Vice President, Human Resources or his delegate. (c) "Arch Stock Account" means the Stock Account to which Arch Stock Units are credited. (d) "Arch Stock Unit(s)" means the share equivalents credited to the Arch Stock Account of a Participant's Compensation Account pursuant to Section 6, with one Arch Stock Unit equal to one share of Arch Common Stock. (e) "Beneficiary" means the person(s) designated by the Participant in accordance with Section 10. (f) "Board" means the Board of Directors of the Company. (g) "Cash Account" means an account established under the Plan for a Participant to which compensation has been or is to be credited in the form of cash and which is to earn interest at the Rate of Interest as provided herein. (h) "Change in Control" means that any of the following events shall have occurred: (i) the Company ceases to be, directly or indirectly, owned of record by at least 1,000 shareholders; 2 (ii) a person, partnership, joint venture, corporation or other entity, or two or more of any of the foregoing acting as a group (or a "person" within the meaning of Section 13(d)(3) of the Exchange Act), other than the Company, a majority-owned subsidiary of the Company or an employee benefit plan of the Company or such subsidiary (or such plan's related trust), become(s) the "beneficial owner" (as defined in Rule 13(d)(3) under the Exchange Act) of 20% or more of the then outstanding voting stock of the Company; (iii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Company's Board (together with any new director whose election by the Company's Board or whose nomination for election by the Company's stockholders, was approved by a vote of at least two- thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office; (iv) all or substantially all of the business of the Company is disposed of pursuant to a merger, consolidation or other transaction in which the Company is not the surviving corporation or the Company combines with another company and is the surviving corporation (unless the shareholders of the Company immediately following such merger, consolidation, combination, or other transaction beneficially own, directly or indirectly, more than 50% of the aggregate voting stock or other ownership interests of (x) the entity or entities, if any, that succeed to the business of the Company or (y) the combined company); or (v) the shareholders of the Company approve a sale of all or substantially all of the assets of the Company or a liquidation or dissolution of the Company. (i) "Committee" means the Compensation Committee (or its successor) of the Board. (j) "Common Stock" means the Company's common stock, $1.00 par value per share. (k) "Company" means Arch Chemicals, Inc., a Virginia corporation, its divisions and subsidiaries, and any successor thereto. (l) "Compensation" means any employee compensation which represents salary, severance pay, bonus, or any other incentive plan payout, in the form of cash or stock, 3 including but not limited to payouts or payment distributions from the Arch Chemicals, Inc. 1999 Long Term Incentive Plan but excluding stock resulting from employee stock option exercises and excluding other incentive payouts which the Administrator prospectively determines to be not eligible to be deferred under this Plan. (m) "Compensation Account" means the account established under the Plan to which the Participant's Deferred Compensation is credited, including the Cash Account, Stock Account, and such other investment accounts as the Committee may establish from time to time. (n) "Corporate Human Resources" means the Corporate Human Resources Department of the Company. (o) "Credit Date" means with respect to Deferred Compensation, such date as designated by Corporate Human Resources that Deferred Compensation shall be credited to the Compensation Account. (p) "Deferred Compensation" means the Compensation elected by the Participant to be deferred pursuant to the Plan. (q) "Distribution" means the distribution of all outstanding shares of Common Stock to the shareholders of Olin. (r) "Distribution Date" means the dividend payment date fixed by the Board of Directors of Olin for the Distribution. (s) "Election" means a Participant's delivery of a written notice of election to Corporate Human Resources electing to defer payment of all or a portion of his or her Compensation. (t) "Employee" means a full-time salaried employee (which term shall be deemed to include officers) on the active payroll of the Company and its affiliates who has at least 1182 Hay Points and who has been selected by the Administrator, and if required, approved by the Committee, to participate in this Plan. (u) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (v) "Fair Market Value" means, with respect to a date, on a per share basis, the average of the high and the low price of a share of Common Stock or Olin Common Stock, as 4 the case may be, as reported on the consolidated tape of the New York Stock Exchange (or such other primary exchange on which such stock is traded) ("Exchange") on such date or if the Exchange is closed on such date, the next succeeding date on which it is open. (w) "Fiscal Year" means that annual period commencing January 1 and ending the following December 31. (x) "Olin" means Olin Corporation, a Virginia corporation and any successor thereto. (y) "Olin Common Stock" means shares of common stock of Olin, par value $1.00 per share. (z) "Olin Employee" means an employee of Olin. (aa) "Olin Employee Deferral Plan" means the Olin Corporation Employee Deferral Plan. (bb) "Olin Stock Account" means the Stock Account to which Olin Stock Units are credited upon transfer from the Olin Employee Deferral Plan and from time to time. (cc) "Olin Stock Unit(s)" means the share equivalents credited to the Olin Stock Account of a Participant's Compensation Account pursuant to Section 6, with one Olin Stock Unit equal to one share of Olin Common Stock. (dd) "Participant" means an Employee selected by the Administrator and if required, approved by the Committee, to participate in the Plan and who has elected to defer payment of all or a portion of his or her Compensation under the Plan. "Participant" shall also include any person who had an account under the Olin Employee Deferral Plan which has been transferred to this Plan. (ee) "Plan" means this Arch Chemicals, Inc. Employee Deferral Plan. (ff) "Rate of Interest" means the rate of interest for the quarterly period ending with the Accounting Date equal to (i) the Company's before-tax cost of borrowing as determined from time to time by the Chief Financial Officer, Controller or Treasurer (or in the event there is no such borrowing, the Federal Reserve A1/P1 Composite rate for 90-day commercial paper plus 10 basis points as determined by such officer) or (ii) such other rate as the Board or the Committee may select prospectively from time to time. 5 (gg) "Section 16(b) Employee" means an Employee or former Employee who is subject to Section 16(b) of the Exchange Act. (hh) "Stock Account" means an account established under the Plan to which shares of Common Stock and Olin Common Stock have been or are to be credited in the form of Arch Stock Units and Olin Stock Units, which shall include the Arch Stock Account and the Olin Stock Account. (ii) "Stock-based Compensation" means Compensation that is being paid out in the form of shares of Common Stock (excluding stock options), such as retention stock units, performance shares and restricted stock units. (jj) "Termination" means retirement from the Company or termination of services as an Employee for any other reason. 3. SHARES; ADJUSTMENTS IN EVENT OF CHANGES IN CAPITALIZATION --------------------------------------------------------- (a) Shares Authorized for Issuance. There shall be reserved for issuance under the Plan 25,000 shares of Common Stock, subject to adjustment pursuant to subsection (b) below. (b) Adjustments in Certain Events. In the event of any change in the outstanding Common Stock of the Company or Olin Common Stock by reason of any stock split, share dividend, recapitalization, merger, consolidation, reorganization, combination, or exchange or reclassification of shares, split- up, split-off, spin-off, liquidation or other similar change in capitalization, or any distribution to common shareholders other than cash dividends, the number or kind of shares or Arch Stock Units or Olin Stock Units, as the case may be that may be issued or credited under the Plan may be adjusted by the Committee so that the proportionate interest of the Participants shall be maintained as before the occurrence of such event. Such adjustment shall be conclusive and binding for all purposes of the Plan. 4. ELIGIBILITY ----------- The Administrator shall have the authority to select among any Employees those Employees who shall be eligible to participate in the Plan. Deferrals to a Stock Account by Section 16(b) Employees must be approved by the Committee. 6 5. ADMINISTRATION -------------- Full power and authority to construe, interpret and administer the Plan shall be vested in the Committee. This power and authority includes, but is not limited to, selecting compensation eligible for deferral, establishing deferral terms and conditions and adopting modifications, amendments and procedures as may be deemed necessary, appropriate or convenient by the Committee. Decisions of the Committee shall be final, conclusive and binding upon all parties. Day- to-day administration of the Plan shall be the responsibility of Corporate Human Resources. 6. PARTICIPANT ACCOUNTS -------------------- (a) Compensation Accounts. Upon election to participate in the Plan, there shall be established a Compensation Account for the Participant to which there shall be credited any Deferred Compensation as of the Credit Date for such deferral. For each type of Compensation to be deferred, the Plan shall provide for a Cash Account and an Arch Stock Account. Stock-based Compensation may only be deferred to an Arch Stock Account. The Committee may establish from time to time other types of Compensation Accounts reflecting different investment options. Each Participant's Compensation Account shall be credited (or debited) on each Accounting Date with income (or loss) based on a hypothetical investment in any one or more of the investment options available under the Plan, as prescribed by the Plan or the Committee. Gains, losses and other elements of determining value shall be determined substantially on the basis of a hypothetical investment in the various investment options, as determined and applied in the manner deemed appropriate by the Committee. (b) Arch Stock Account. If a Participant elects to invest all or any portion of his or her Deferred Compensation in the Arch Stock Account, that portion of the Participant's Compensation Account shall be credited on the Credit Date with Arch Stock Units equal to the number of shares of Common Stock (including fractions of a share determined to three decimal places) that could have been purchased with the amount of such Deferred Compensation at the Fair Market Value on the Credit Date; provided that in the case of Stock-based Compensation, the Arch Stock Account shall be credited with the number of Arch Stock Units equal to the number of shares being paid out as the Stock-based Compensation. (c) Dividends and Interest. Each time a cash dividend is paid on Common Stock or Olin Common Stock, a Participant 7 who has shares of such stock credited to his or her Stock Account shall receive a credit in applicable Stock Units for such dividends on the dividend payment date to his or her applicable Stock Account. The number of additional Arch Stock Units or Olin Stock Units (rounded to the nearest one-thousandth of a share) credited to the applicable Stock Account will be determined by dividing (i) the product of (a) the dollar value of the cash dividend declared in respect of a share of Common Stock or Olin Common Stock, as applicable, multiplied by (b) the number of Stock Units credited to the Participant's applicable Stock Account as of the dividend record date by (ii) the Fair Market Value of a share of Common Stock or Olin Common Stock, as applicable, on the dividend payment date. The Cash Account of a Participant shall be credited on each Accounting Date with interest for the quarter ending on such date, payable at the Rate of Interest on such date. (d) Adjustment for Distribution. As of the Distribution Date, the cash account and stock account held under the Olin Employee Deferral Plan of each Arch Employee (after giving effect to the adjustment described in Section 6(e) of the Olin Employee Deferral Plan) shall be transferred to this Plan. Except as provided in Section 6(c) with respect to dividends or in Section 3, no additional contributions or additions may be made to a Participant's Olin Stock Account after the Distribution Date. (e) Plan Remains Unfunded. Amounts credited to a Compensation Account shall remain a part of the general funds of the Company and nothing contained in this Plan shall be deemed to create a trust or fund of any kind or create any fiduciary relationship. Nothing contained herein shall be deemed to give any Participant any ownership or other proprietary, security or other rights in any funds, stock or assets owned or possessed by the Company, whether or not earmarked for the Company's own purposes as a reserve or fund to be utilized by the Company for the discharge of its obligations hereunder. To the extent that any person acquires a right to receive payments or distributions from the Company under this Plan, such right shall be no greater than the right of any unsecured creditor of the Company. 7. MANNER OF ELECTION ------------------ (a) General. Any Employee selected by the Administrator to participate in the Plan may elect to do so in any Fiscal Year by delivering to Corporate Human 8 Resources a written notice on a form prescribed by Corporate Human Resources electing to defer payment of all or a portion (in 25% increments or other increments so prescribed by the Committee) of his or her Compensation (an "Election"), provided Section 16(b) Employees who elect to defer to an Arch Stock Account must have the prior approval of the Committee. Such Election shall specify whether the payout for the Compensation Account shall be in a lump sum or in annual installments (not to exceed 20). Separate elections may be made with respect to each type of Deferred Compensation; however, Compensation Accounts for the same type of Deferred Compensation shall be paid out in accordance with the same payout schedule. The Election must be filed on or before December 31 in order to be effective for amounts earned in the immediately succeeding Fiscal Year. An effective Election may not be revoked or modified (except as otherwise stated herein) with respect to a Fiscal Year for which such Election is effective. (b) Changes in Election. A Participant will be allowed to change the Election as provided herein. Any change with respect to the terms of a Participant's Election for (i) amount or form of any future deferral hereunder may be made at any time prior to such Compensation being earned and (ii) the timing (which change may not accelerate a distribution date) or amount of payments from any Compensation Account shall only be effective if made at least six months prior to the payout and in the calendar year prior to the calendar year payout is to occur. The most recent prior elections and beneficiary designations applicable to the Olin Employee Deferral Plan shall govern this Plan unless changed subsequent to the Distribution or is inconsistent with this Plan. 8. MANNER OF PAYMENT ----------------- (a) Form of Payment. In accordance with the Participant's Election, amounts credited to a Participant's Compensation Account will be paid in a lump sum or in the form of annual installments. Except as provided in Section 11, in the case of distributions from the Arch Stock Account (unless the Administrator, or in the case of a Section 16(b) Employee, the Committee, decides it shall be in the form of cash), distributions shall be in shares of Common Stock and in case of distributions from any other Compensation Account (including the Olin Stock Account), distributions shall be in the form of cash (unless the Committee decides it shall be in the form of shares of Common Stock), in each case to the Participant or, in the event of his or her death, to the Beneficiary. If a Participant elects to receive payment in installments, the payment period shall not exceed 20 years. 9 Payment dates shall be January 1 or July 1 pursuant to Participant's Election. (b) Calculation for Payments in Cash. The amount of any cash distribution to be made in installments with respect to a Compensation Account (other than the Arch Stock Account) will be determined by multiplying (i) the balance in such Compensation Account on the payment date by (ii) a fraction, the numerator of which is one and the denominator of which is the number of installments in which distributions remain to be made (including the current distribution). If a Stock Account is to be paid out in cash, the amount of any cash distribution to be made in installments with respect to Arch or Olin Stock Units will be determined by (i) multiplying the number of Arch Stock Units or Olin Stock Units attributable to such installment (determined as hereinafter provided) by (ii) the Fair Market Value of a share of Common Stock or Olin Common Stock, as applicable, on the fifth business day immediately prior to the date on which such installment is to be paid. The number of Arch Stock Units or Olin Stock Units, as applicable, attributable to an installment shall be determined by multiplying (i) the current number of Arch Stock Units or Olin Stock Units in the applicable Stock Account by (ii) a fraction, the numerator of which is one and the denominator of which is the number of installments in which distributions remain to be made (including the current distribution). (c) Calculation for Payments in Stock. The amount of any stock distribution to be made in installments with respect to the amount of a Compensation Account invested in the Arch Stock Account shall be determined by multiplying (i) the current number of Arch Stock Units by (ii) a fraction, the numerator of which is one and the denominator of which is the number of installments in which distributions remain to be made (including the current distribution). If a Compensation Account (other than the Arch Stock Account) is to be paid out in shares of Common Stock, the amount of any stock distribution to be made in installments with respect to such Compensation Account shall be determined by dividing the amount of cash attributable to such installment (determined as provided above) by the Fair Market Value of the Common Stock on the fifth business day immediately prior to the date on which such installment is to be paid. (d) Fractional Shares; Required Withholding. Only whole numbers of shares of Common Stock will be issued, with any fractional shares to be paid in cash. To the extent required by law, taxes shall be withheld from payouts of the 10 Compensation Account, provided that if a fractional share results after withholding, such fractional share shall be withheld as additional tax. 9. COMMENCEMENT OF PAYMENTS ------------------------ Payments of amounts deferred pursuant to a valid Election shall commence (i) with respect to a lump sum, on January 1 or July 1 as indicated in a Participant's Election and (ii) with respect to annual installments, on January 1 or July 1 of the first calendar year of deferred payment as selected by a Participant in his or her Election. If a Participant dies prior to the first deferred payment specified in an Election or prior to completion of all installments, payments shall commence to the Participant's Beneficiary on the first or next payment date so specified, unless the Administrator elects otherwise to provide for a lump-sum distribution of the deceased Participant's Compensation Accounts. 10. BENEFICIARY DESIGNATION ----------------------- A Participant may designate one or more persons to whom payments are to be made if the Participant dies before receiving payment of any or all amounts due hereunder. A designation of Beneficiary will be effective only after the signed Election is filed with Corporate Human Resources while the Participant is alive and will cancel all designations of Beneficiary signed and filed earlier. If Corporate Human Resources so permits, Beneficiaries may be designated for each type of Compensation that is deferred. If the Participant fails to designate a Beneficiary as provided above, the remaining unpaid amounts shall be paid in one lump sum to the estate of such Participant. If all Beneficiaries of the Participant die before the Participant or before complete payment of all amounts due hereunder, the remaining unpaid amounts shall be paid in one lump sum to the estate of the last to die of such Beneficiaries. A Participant may, at any time prior to death, elect to change the designation of a Beneficiary. 11. CHANGE IN CONTROL ----------------- Notwithstanding any provision of this Plan to the contrary, in the event of a Change in Control, each Participant in the Plan shall receive an automatic lump-sum cash distribution of all amounts accrued in the Participant's Compensation Account (including interest at the Rate of Interest from the date of the Change in Control through the business day immediately preceding the date of distribution) not later than 15 days after the date of the 11 Change in Control. For this purpose, the balance in the portion of a Participant's Compensation Account invested in the Arch Stock Account or Olin Stock Account shall be determined by multiplying the number of applicable Stock Units by the higher of (a) the highest Fair Market Value of Common Stock or Olin Common Stock, as applicable, on any date within the period commencing 30 days prior to such Change in Control and ending on the date of the Change in Control, or (b) if the Change in Control of the Company occurs as a result of a tender or exchange offer or consummation of a corporate transaction, then the highest price paid per share of Common Stock or Olin Common Stock, as applicable, pursuant thereto. Any consideration other than cash forming a part or all of the consideration for Common Stock to be paid pursuant to the applicable transaction shall be valued at the valuation price thereon determined by the Board. In addition, the Company shall reimburse a Participant for the legal fees and expenses incurred if the Participant is required to seek to obtain or enforce any right to distribution. In the event that it is determined that such Participant is properly entitled to a cash distribution hereunder, such Participant shall also be entitled to interest thereon payable in an amount equivalent to the prime rate of interest as announced from time to time by Citibank, N.A. from the date such distribution should have been made to and including the date it is made. Notwithstanding any provision of this Plan to the contrary, this Section 11 as applied to any Participant may not be amended or modified to the detriment of a Participant after a Change in Control occurs without the written consent of such Participant. 12. LOANS ----- The Administrator may, upon rules and procedures established by it, permit Participants to borrow from their Compensation Accounts up to 50% of the value of the Participant's Stock Account and up to 100% of the Participant's other Compensation Accounts with such accounts constituting security for repayment of such borrowings and with such borrowings bearing interest at market rates as determined by the Administrator. In addition to terms established by the Administrator, borrowings shall be subject to the following terms and conditions: (1) a borrowing may not exceed in principal amount outstanding at any one time $50,000 and the minimum borrowed amount shall be $1,000, (2) a Participant may not have more than one borrowing outstanding hereunder at any one time, (3) a 12 borrowing shall mature in not more than five years, (4) the annual interest rate on the borrowing, which shall be fixed during its term (except it may increase in the case of default), shall be 25 basis points over the minimum rate required by the Internal Revenue Service to avoid imputation of income and (5) principal and interest payments will amortize over the life of the borrowing except Participants with borrowings maturing over two years or more may instead elect to make annual principal installment payments of five percent and pay the balance of principal at maturity. Notwithstanding any later maturity date, all such borrowings by Participant become due and payable when the Participant's employment with the Company and any affiliate terminates. 13. INALIENABILITY OF BENEFITS -------------------------- The interests of the Participants and their Beneficiaries under the Plan may not in any way be voluntarily or involuntarily transferred, alienated or assigned, nor subject to attachment, execution, garnishment or other such equitable or legal process. A Participant or Beneficiary cannot waive the provisions of this Section 13. 14. GOVERNING LAW ------------- The provisions of this plan shall be interpreted and construed in accordance with the laws of the State of Connecticut, except to the extent preempted by Federal law. 15. AMENDMENTS ---------- The Committee may amend, alter or terminate this Plan at any time without the prior approval of the Board; provided, however, that the Committee may not, without approval by the Board increase the number of securities that may be issued under the Plan (except as provided in Section 3(b)). No amendment or modification may impair the rights of a Participant to receive amounts accrued in the Participant's Compensation Account at the time of the effectiveness of the amendment or modification. 16. RULE 16B-3 COMPLIANCE --------------------- It is the intention of the Company that all transactions under the Plan be exempt from liability imposed by Section 16(b) of the Exchange Act. Therefore, if any transaction under the Plan is found not to be in compliance with an exemption from such Section 16(b), the provision of the Plan governing such transaction shall be deemed amended so that the transaction does so comply and is so exempt, to the extent permitted by law and deemed advisable by the 13 Committee, and in all events the Plan shall be construed in favor of its meeting the requirements of an exemption. 17. EFFECTIVE DATE -------------- The Plan shall become effective as of the Distribution Date. EX-99.1 24 ARCH CHEMICALS INFORMATION STATEMENT DTD 1/21/99 Exhibit 99.1 OLIN CORPORATION 501 Merritt 7 P.O. Box 4500 Norwalk, CT 06856-4500 January 21, 1999 Dear Shareholder: I am pleased to report that the previously announced spin-off of Olin's specialty chemical businesses is expected to become effective on February 9, 1999. Arch Chemicals, Inc., a recently-formed Virginia corporation which will own all of Olin's specialty chemical businesses ("Arch Chemicals"), will commence operations on that day as an independent public company. Arch Chemicals' shares will be listed on the New York Stock Exchange under the symbol "ARJ". Holders of Olin Common Stock of record as of the close of business on February 1, 1999 (the "Record Date"), will receive one Arch Chemicals common share for every two shares of Olin Common Stock held. If you own Olin Common Stock on the Record Date, the Distribution Agent will automatically credit your shares of Arch Chemicals Common Stock to a book- entry account established to hold your Arch Chemicals Common Stock and will mail you a statement of your Arch Chemicals Common Stock ownership as soon as practicable after February 9, 1999; no action is required on your part to receive your Arch Chemicals shares. You will not be required either to pay anything for the new shares or to surrender any Olin shares. No fractional shares of Arch Chemicals stock will be issued. If you otherwise would be entitled to a fractional share you will receive a check for the cash value thereof, which may be taxable to you. In due course you will be provided with information to enable you to compute your tax basis in both Olin and Arch Chemicals stock. Olin expects to receive an opinion of counsel that for U.S. federal income tax purposes, the distribution of the new Arch Chemicals shares is tax-free to Olin and to you to the extent that you receive Arch Chemicals shares. The enclosed Information Statement describes the distribution of Arch Chemicals shares and contains important information about Arch Chemicals, including financial statements. I suggest that you read it carefully. If you have questions regarding the distribution, please contact Richard Koch, Vice President-Investor Relations at the following telephone number: (203) 750- 3254. I believe the distribution of Arch Chemicals shares will serve the business interests of both Olin and Arch Chemicals. This action is demonstrative of and in keeping with Olin's goal of further increasing shareholder value. Sincerely, Donald W. Griffin Chairman of the Board, President & Chief Executive Officer INFORMATION STATEMENT ARCH CHEMICALS, INC. Distribution of Approximately 22,961,432 Shares of Common Stock This Information Statement is being furnished in connection with the distribution (the "Distribution") by Olin Corporation ("Olin") to holders of its common stock, par value $1 per share ("Olin Common Stock"), of all the outstanding shares of common stock, par value $1 per share ("Company Common Stock"), of Arch Chemicals, Inc. (the "Company"). Olin has transferred or will transfer to the Company all of the specialty chemical businesses formerly conducted by Olin. See "Business." Shares of Company Common Stock will be distributed to holders of Olin Common Stock of record as of the close of business on February 1, 1999 (the "Record Date"). Each such holder will receive one share of Company Common Stock for every two shares of Olin Common Stock held on the Record Date. The Distribution will be effective at 12:01 a.m. on February 9, 1999. The Company currently intends to distribute whole shares of Company Common Stock by book- entry. Instead of physical stock certificates, shareholders will receive a statement of their book-entry accounts for Company Common Stock, which statements are expected to be distributed as soon as practicable after February 9, 1999. Following the Distribution, shareholders may request that their shares of Company Common Stock be transferred to a brokerage account or that physical stock certificates for their shares be issued to them. No consideration will be paid by Olin's shareholders for shares of Company Common Stock. Each share of Company Common Stock distributed will be accompanied by one preferred stock purchase right. There is no current trading market for Company Common Stock. The Company has applied to list the Company Common Stock on the New York Stock Exchange, Inc. In reviewing this Information Statement, you should carefully consider the matters described under the caption "Risk Factors" on pages 11-14. ---------------- NO SHAREHOLDER APPROVAL OF THE DISTRIBUTION IS REQUIRED OR SOUGHT. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------- Shareholders of Olin with inquiries related to the Distribution should contact Investor Relations, Olin Corporation, 501 Merritt 7, P.O. Box 4500, Norwalk, Connecticut 06856-4500, telephone (203) 750-3254, or Olin's stock transfer agent, ChaseMellon Shareholder Services, L.L.C., 85 Challenger Road, Ridgefield Park, New Jersey 07660, telephone (800) 306-8594. The date of this Information Statement is January 21, 1999. INFORMATION STATEMENT TABLE OF CONTENTS
Page ---- SUMMARY.................................................................. 1 THE DISTRIBUTION......................................................... 6 General................................................................ 6 Manner of Effecting the Distribution................................... 6 Reasons for the Distribution........................................... 6 Results of the Distribution............................................ 8 Federal Income Tax Consequences of the Distribution.................... 8 Listing and Trading of Company Common Stock............................ 9 Third Party Consents; Regulatory Approvals............................. 10 Reasons for Furnishing this Information Statement...................... 10 RISK FACTORS............................................................. 11 Lack of Operating History As a Separate Entity......................... 11 Dependance on the Semiconductor Industry............................... 12 Environmental Liabilities.............................................. 12 Ability to Satisfy Indemnification Obligations......................... 12 Certain Tax Risks of the Distribution.................................. 13 International Operations............................................... 13 Company Dividend Policy................................................ 13 Absence of Trading Market for Company Stock............................ 13 Changes in Trading Prices of Olin Common Stock......................... 14 Competition............................................................ 14 Certain Anti-takeover Effects.......................................... 14 DIVIDEND POLICY.......................................................... 14 CAPITALIZATION........................................................... 15 SELECTED FINANCIAL AND OPERATING DATA.................................... 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................................... 17 BUSINESS................................................................. 28 General................................................................ 28 Products and Services.................................................. 28 Customers.............................................................. 30 Raw Materials and Energy............................................... 31 Research and Development; Patents...................................... 31 Seasonality............................................................ 31 Backlog................................................................ 32 U.S. Government Contracts and Regulations.............................. 32 Novation of U.S. Government Contracts.................................. 32 Competition............................................................ 32 Export Sales........................................................... 32 Employees.............................................................. 32 Environmental Matters.................................................. 33 Credit Facility........................................................ 33 PROPERTIES............................................................... 34 Principal Manufacturing Facilities..................................... 35 LEGAL PROCEEDINGS........................................................ 37
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Page ---- RELATIONSHIP BETWEEN OLIN AND THE COMPANY AFTER THE DISTRIBUTION........... 38 Distribution Agreement................................................... 38 Charleston Services Agreement............................................ 39 Chlor-Alkali Supply Agreement............................................ 39 Covenant Not To Compete Agreement........................................ 39 Employee Benefits Allocation Agreement................................... 40 Intellectual Property Transfer and License Agreement..................... 40 Information Technology Services Agreement................................ 41 Sublease................................................................. 41 Tax Sharing Agreement.................................................... 41 Trade Name License Agreement............................................. 41 Transition Services Agreement............................................ 41 MANAGEMENT AND EXECUTIVE COMPENSATION...................................... 42 Board of Directors....................................................... 42 Committees of the Board of Directors..................................... 43 Compensation of Directors................................................ 44 Executive Officers of the Company........................................ 45 Compensation of Executive Officers....................................... 46 Adjustment to Prior Olin Equity-Based Benefits........................... 48 Stock Plan for Nonemployee Directors..................................... 48 Pension Plans............................................................ 49 Savings Plan............................................................. 51 Arch Chemicals, Inc. 1999 Long Term Incentive Plan....................... 51 Retiree Medical and Life Insurance Benefits.............................. 52 Other Benefits........................................................... 53 Executive Agreements..................................................... 53 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION................ 53 BENEFICIAL OWNERSHIP....................................................... 54 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................. 56 DESCRIPTION OF CAPITAL STOCK............................................... 56 Authorized Capital Stock................................................. 56 Common Stock............................................................. 56 Preferred Stock.......................................................... 56 Authorized But Unissued Capital Stock.................................... 57 Rights................................................................... 57 No Preemptive Rights..................................................... 57 Certain Provisions of the Articles, By-laws and Virginia Corporate Law... 57 RIGHTS AGREEMENT........................................................... 58 LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS.................... 59 AVAILABLE INFORMATION...................................................... 60 INDEX TO COMBINED FINANCIAL STATEMENTS..................................... F-1
ii SUMMARY The following is a summary (this "Summary") of certain information contained in this Information Statement. This Summary is included for convenience only and should not be considered complete. This Summary is qualified in its entirety by the more detailed information contained elsewhere in this Information Statement which should be read in its entirety. Certain capitalized terms used in this Summary are defined elsewhere in this Information Statement. THE DISTRIBUTION Distributing Company Olin Corporation, a Virginia corporation ("Olin"), a manufacturer concentrated in the chemicals, metals and ammunition industries. References to Olin include its consolidated subsidiaries except where the context otherwise requires. Distributed Company Arch Chemicals, Inc., a Virginia corporation (the "Company"), which will own all of the specialty chemical businesses formerly operated by Olin (the "Specialty Chemical Businesses"). References herein to the Company prior to the Distribution mean the specialty chemical businesses as conducted by Olin prior to the Distribution. See "Business." Distribution Ratio Each holder of Olin Common Stock will receive a dividend of one share of Company Common Stock (and the associated preferred stock purchase right) for every two shares of Olin Common Stock held on the Record Date (the "Distribution Ratio"). Securities to be Distributed Based on 45,922,864 shares of Olin Common Stock outstanding on December 31, 1998, approximately 22,961,432 shares of Company Common Stock, together with associated preferred stock purchase rights (the "Rights" and, collectively with the Company Common Stock, the "Shares") will be distributed. The Shares to be distributed will constitute all of the outstanding Shares of the Company immediately after the Distribution. No action is required by an Olin shareholder to receive the Shares to which an Olin shareholder is entitled. Fractional Shares Fractional Shares will not be distributed. Fractional Shares will be aggregated and sold in the public market by the Distribution Agent and the aggregate net cash proceeds will be distributed ratably to those shareholders who would otherwise have received fractional interests. See "The Distribution--Manner of Effecting the Distribution." Distribution Agent, ChaseMellon Shareholder Services, L.L.C. (the Transfer Agent and "Distribution Agent") will be the Distribution Agent, Registrar for the Transfer Agent and Registrar for the Shares. Shares Record Date February 1, 1999 (close of business). Distribution Date February 9, 1999, 12:01 a.m. (the "Distribution Date"). On the Distribution Date, Olin will transfer the Shares to the Distribution Agent. The Distribution Agent will mail shareholder statements of book-entry accounts as soon as practicable after the Distribution Date. The Company does not plan to issue any physical stock certificates for the Shares at the time of the Distribution. 1 Federal Income Tax The Distribution is conditioned upon the receipt by Consequences of the Olin of an opinion of its counsel that for Federal Distribution income tax purposes the receipt of Shares by Olin shareholders will be tax-free. Cash received by shareholders in lieu of fractional Share interests will be treated as payment in exchange for such stock and may be taxable to the shareholder. No gain or loss with respect to the Shares will be recognized by Olin on the Distribution. Such opinion is subject to certain factual representations and assumptions. No ruling has been or will be sought from the Internal Revenue Service with respect to the Federal income tax consequences of the Distribution. See "The Distribution--Federal Income Tax Consequences of the Distribution." Stock Exchange There is not currently a public market for the Company Listing Common Stock. The Company has applied for the listing of the Company Common Stock on the New York Stock Exchange, Inc. (the "NYSE"), under the symbol "ARJ". If such listing is approved, it is possible that trading may commence on a "when-issued" basis prior to the Distribution. On the first NYSE trading day following the Distribution Date, "when-issued" trading in respect of Company Common Stock will end and "regular-way" trading will begin. See "The Distribution--Listing and Trading of Company Common Stock." Company Indebtedness Prior to the Distribution, the Company is expected to succeed to two credit facilities, one of which is expected to be a $125 million, five-year revolving credit facility (the "Five-year Facility") and the other is expected to be a $125 million, 364-day credit facility (the "364-day Facility" and, together with the Five-year Facility, the "Credit Facility"), each established by Olin. Olin expects to have previously borrowed $75 million under the Five-year Facility, which liability will be assumed by the Company. Olin intends to use the proceeds for its own general corporate purposes, which may include share repurchases and future acquisitions relating to the Retained Businesses. The amounts remaining under the Credit Facility are expected to provide sufficient liquidity for the Company's current funding needs. The Credit Facility is expected to have various borrowing options and to contain customary commercial bank covenants, including certain restrictions on the payment of dividends by the Company. See "Business--Credit Facility." Relationship with Olin After the Following the Distribution, the Company will be an Distribution independent public company, and Olin will have no continuing stock ownership interest in the Company. No officer or director of Olin or the Company will be an officer or director of the other company immediately following the Distribution, and there is no present intention to subsequently name any officer or director of Olin or the Company as an officer or director of the other company. The Company and Olin will enter into various agreements for the purpose of accomplishing the Distribution, governing their relationship subsequent to the Distribution and providing for the allocation of employee benefits, tax and certain other liabilities and obligations attributable to periods prior to the Distribution. These include, without limitation, agreements providing for (i) the transfer of assets to the Company and the assumption of certain liabilities of Olin by the Company, the indemnification by the Company of Olin against liabilities, litigation and claims arising out of the Specialty Chemical Businesses, as well as costs associated with the removal, remediation or 2 control of environmental conditions relating to the Company's current facilities and certain off-site locations, and the indemnification by Olin of the Company against liabilities, litigation and claims arising out of Olin's retained and former businesses following the Distribution, (ii) the transfer by Olin of certain technologies and intellectual property rights to the Company, (iii) the transfer of certain Olin trademarks to the Company, (iv) the supplying of certain services by Olin to the Company with respect to adjoining plants located in Charleston, Tennessee and (v) the supplying of chlorine and caustic soda by Olin to the Company following the Distribution. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Environmental," "Business--Environmental Matters" and "Relationship Between Olin and the Company After the Distribution." Dividend Policy The payment and level of cash dividends by the Company after the Distribution will be subject to the discretion of the Board of Directors of the Company (the "Board"). Olin currently anticipates that the Company will initially pay quarterly cash dividends which, on an annual basis, will aggregate $0.80 per Share. However, future dividend decisions will be based on, and affected by, a number of factors, including the operating results and financial requirements of the Company on an independent basis, and will be subject to the restrictive covenants of the Credit Facility. See "Dividend Policy" and "Business--Credit Facility." Certain Provisions of the Company's Certain provisions of the Company's Amended and Articles, By-laws and Restated Articles of Incorporation (the "Articles") and Virginia Corporate amended By-laws (the "By-laws"), as each will be in Law; Rights Agreement effect following the Distribution, may have the effect of making more difficult an acquisition of control of the Company in a transaction not approved by the Board. The Articles authorize the Board to issue up to 10 million shares of preferred stock in one or more series and to fix the relative rights and preferences and the voting powers of the shares of any such series. See "Description of Capital Stock--Preferred Stock." The Board consists of three classes of directors, each of which serves for three years. Directors may be removed only with cause and upon the affirmative vote of 80% of the voting power of the outstanding voting shares, voting as a single voting group, and vacancies on the Board may be filled only by the Board unless the vacancy is to be filled at an annual meeting of the shareholders. The affirmative vote of 80% of the voting power of the outstanding voting shares, voting as a single voting group, is required to amend the provisions of the Articles relating to the parameters of the Board. The Company's By-laws require that shareholders give the Secretary of the Company notice of shareholder nominees for election as a director no more than 120 days and no later than 90 days before the anniversary date of the first mailing of the Company's proxy statement for the immediately preceding year's annual meeting. Special meetings of shareholders may be called only by the Board or designated officers of the Company. The By-laws also require shareholders to give the Secretary of the Company notice of shareholder proposals to be presented at the annual shareholders meeting no more than 120 days and no later than 90 days before the anniversary date of the first mailing of the Company's proxy statement for the immediately preceding year's annual meeting. The Board has the power to amend the By- 3 laws, but shareholders may not amend any provision of the By-laws without the affirmative vote of 80% of the voting power of the outstanding voting shares, voting as a single voting group. See "Description of Capital Stock--Certain Provisions of the Articles, By-laws and Virginia Corporate Law." The Rights Agreement and certain sections of the Virginia Stock Corporation Act described elsewhere herein will also make more difficult an acquisition of control of the Company in a transaction not approved by the Board. See "Rights Agreement" and "Description of Capital Stock--Certain Provisions of the Articles, By-laws and Virginia Corporate Law." The Company has elected to "opt out" of the control share acquisition provisions under Article 14.1 of the Virginia Stock Corporation Act, which imposes restrictions on the voting rights of certain significant shareholders. See "Description of Capital Stock--Certain Provisions of the Articles, By-laws and Virginia Corporate Law." Risk Factors Shareholders should consider certain factors as discussed under "Risk Factors." Principal Office of 501 Merritt 7, Norwalk, Connecticut 06851. the Company 4 ARCH CHEMICALS, INC. SUMMARY FINANCIAL INFORMATION (Dollars in Millions) The historical financial information presented below summarizes certain financial information of the Company and is derived from the Combined Financial Statements of the Company. Such historical financial data may not be indicative of the Company's future performance as an independent company. The following historical financial information includes an allocated share of Olin's historical centralized activities. The summary data presented below should be read in conjunction with the Combined Financial Statements and Notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Information Statement.
Unaudited Nine Months Ended Years Ended September 30, December 31, ----------------- -------------------- Operating Data: 1998 1997 1997 1996 1995 - --------------- -------- -------- ------ ------ ------ Sales $ 694.4 $ 728.1 $929.9 $913.5 $872.8 Operating Income 59.7 68.5 79.0 85.7 54.7 Net Income(1) 41.4 48.1 56.3 61.1 43.9
Unaudited September 30, 1998 December 31, ------------------ -------------------- Balance Sheet Data: 1997 1996 1995 - ------------------- ------ ------ ------ Total Assets $691.2 $693.2 $651.2 $624.1 Short-Term Borrowings(1) 0.3 1.4 1.8 0.1 Total Liabilities 217.7 237.6 221.6 212.7 Equity and Cumulative Translation Ad- justment 473.5 455.6 429.6 411.4
- -------- (1) The financial data above do not include any amount for borrowings or the related interest expense relating to the Credit Facility. Prior to the Distribution Date, Olin expects to borrow $75 million under the Five-year Facility, which liability will be assumed by the Company. See Notes to Combined Financial Statements--"Pro forma Effect of Borrowings under the Credit Facility (Unaudited)." 5 THE DISTRIBUTION General The Board of Directors of Olin has approved the distribution of all of the outstanding shares of Company Common Stock to the holders of Olin Common Stock. In the Distribution, each holder of Olin Common Stock will receive as a dividend one share of Company Common Stock (and the associated Right) for every two shares of Olin Common Stock held on the Record Date. Manner of Effecting the Distribution The general terms and conditions relating to the Distribution are set forth in the Distribution Agreement between the Company and Olin (the "Distribution Agreement"). See "Relationship Between Olin and the Company After the Distribution--Distribution Agreement." Pursuant to the terms and conditions of the Distribution Agreement, the Distribution will be effective on February 9, 1999 (the "Distribution Date") with the Shares being distributed through a book-entry system to holders who are shareholders of record of Olin at the close of business on the Record Date. Olin currently intends to use a book-entry system to implement the distribution of the Shares in the Distribution. Prior to the Distribution Date, one or more certificates representing all issued and outstanding Shares will be delivered by Olin to the Distribution Agent. As soon as practicable after the Distribution Date, a shareholder statement of book-entry account will be mailed to each shareholder stating the number of whole Shares received by such shareholder in the Distribution; fractional Shares will not be distributed. Following the Distribution, shareholders may request that their Shares be transferred to a brokerage or other account or may request delivery of physical stock certificates for their Shares. Each Olin shareholder will receive one Share for every two shares of Olin Common Stock held on the Record Date. Olin shareholders will not be required to pay for Shares received in the Distribution, or to surrender or exchange Olin shares in order to receive Shares of the Company. No vote of Olin shareholders is required or sought in connection with the Distribution, and Olin shareholders have no appraisal rights in connection with the Distribution. Fractional Shares will not be issued to Olin shareholders as part of the Distribution nor credited to book-entry accounts. In lieu of receiving fractional Shares, each holder of Olin Common Stock who would otherwise be entitled to receive a fractional Share will receive cash for such fractional interest. The Distribution Agent will, as soon as practicable after the Distribution Date, aggregate fractional Shares into whole Shares and sell them in the open market at then prevailing market prices and distribute the aggregate proceeds (net of brokerage fees) ratably to Olin shareholders otherwise entitled to fractional interests. The amount of such payment will depend on the prices at which the aggregated fractional Shares are sold by the Distribution Agent in the open market shortly after the Distribution Date. In addition, at the time of the Distribution, each outstanding option to purchase Olin Common Stock held by an employee of the Company or Olin on the Distribution Date will be converted into both an option to purchase Company Common Stock and a separate option to purchase Olin Common Stock. See "Relationship Between Olin and the Company After the Distribution--Employee Benefits Allocation Agreement" and "Management and Executive Compensation-- Adjustment to Prior Olin Equity-Based Benefits." In order to be entitled to receive Shares of the Company in the Distribution, Olin shareholders must be shareholders at the close of business on the Record Date, February 1, 1999. Reasons for the Distribution Different Businesses. Olin currently operates directly and through its subsidiaries primarily in four major lines of business that have substantially different characteristics. The metals, chlor-alkali and ammunition businesses (the "Retained Businesses") have exhibited different growth characteristics, capital requirements and competitive dynamics than the Specialty Chemical Businesses and these differences are expected to continue in the future. Moreover, the different businesses require inherently different strategies in order to maximize their long-term value. Consequently, Olin's current structure, which involves the operation of each of these businesses 6 under a single corporate entity, is not the most effective structure to design and implement the distinct strategies necessary to operate each business successfully in a manner that maximizes its long-term value. The Retained Businesses are cyclical, capital intensive, cash-flow generating commodity-type businesses that have low industry growth rates and little pricing leverage. Their success depends largely on attaining scale- related benefits by reducing manufacturing costs through the use of low cost manufacturing processes at high levels of capacity, and by engaging in strategic acquisitions to enable the consolidation of operations and to produce increased efficiencies of scale. By contrast, the Specialty Chemical Businesses are high growth, value-added businesses with less cyclicality. These businesses also have higher pricing leverage because product prices are more value-driven. The success of the Specialty Chemical Businesses depends on developing close customer relationships and new technology-driven product solutions to benefit specific customers. The projected high growth of the Specialty Chemical Businesses through internally developed products and products produced through joint ventures is expected to make the Company Common Stock more highly valued with investors and thus more valuable to the Company for use in making acquisitions to further grow the Specialty Chemical Businesses. More Effective Capital Deployment. Consistent with recent experience, Olin's management anticipates that the Retained Businesses and Specialty Chemical Businesses will require substantial amounts of capital in order to fund their expansion plans. As has been the case in the past, it is expected that funds requested for such capital spending will exceed the amount of funds that will be approved for usage due to self-imposed limitations on Olin's capital expenditures. In the past this situation has caused competition for these capital resources to fund the projects of the Retained Businesses and the Specialty Chemical Businesses. Accordingly, the creation of two separate, publicly-traded entities will facilitate the more effective deployment of capital by Olin and the Company, since each would be free to obtain and employ its own capital resources, without competing with the other businesses, in the areas each believes it has the greatest opportunity to produce attractive returns. Management Focus and Incentives. The Retained Businesses and the Specialty Chemical Businesses are different businesses with few common characteristics and a number of markedly different growth characteristics. As a result, Olin currently faces difficulty in maintaining the appropriate balance of management focus on each of its separate businesses. By separating Olin into two independent companies, the management of each independent company will be able to focus its attention and financial resources wholly on its respective businesses, enabling management to respond solely to the characteristics and competitive disciplines of its particular industries. Moreover, in multi-industry companies, it is difficult to structure management incentives that encourage management to focus on its own businesses, rather than on overall corporate performance, by rewarding managers in a manner directly related to the performance of their respective businesses. For example, many companies design stock option programs to provide management with proper incentives to enhance shareholder value, but to the extent that the overall financial performance, and therefore the stock price performance, of a multi-industry company such as Olin is based in part on factors that are unrelated to the performance of any particular business, this incentive is diluted and consequently is less effective. Although Olin currently employs stock option programs for its management, the value and effectiveness of these programs in creating the desired incentives will be enhanced by separating Olin into the Retained Businesses and the Specialty Chemical Businesses and providing the management of each with the opportunity for future incentives based on the direct performance of its business. Additional Benefits To Be Achieved from the Distribution. As a result of the above factors, several additional benefits should result from the Distribution. The ability for each of the Retained Businesses and the Specialty Chemical Businesses to pursue acquisitions and other investment opportunities is expected to be enhanced by providing differentiated access to the capital markets for each operation and by creating more focused acquisition currencies for each business (i.e., separately traded common stock). Moreover, research coverage for each of the businesses also should be enhanced as a result of creating the Company as a focused, pure-play specialty chemical company and establishing Olin as a more focused commodity materials company, 7 each of which will be easier to analyze and compare to other companies within its respective industry sector. Finally, broader and more tailored investor ownership will be encouraged in light of the disparate risk/reward profiles of the Retained Businesses and the Specialty Chemical Businesses. As a result of the foregoing, Olin has determined that the best means of improving the fit and focus of Olin's businesses is to distribute the Company Common Stock to Olin's public shareholders. For information concerning certain relationships between the Company and Olin following the Distribution, see "Relationship Between Olin and the Company After the Distribution" elsewhere herein. Results of the Distribution After the Distribution, the Company will be an independent public company owning and operating the Specialty Chemical Businesses. The number and identity of shareholders of the Company immediately after the Distribution will be the same as the number and identity of the shareholders of Olin on the Record Date. Immediately after the Distribution, the Company expects to have approximately 9,100 holders of record of Shares and approximately 22,961,432 Shares outstanding, based on the number of record shareholders and outstanding shares of Olin Common Stock on December 31, 1998, and the Distribution Ratio of one Share for every two shares of Olin Common Stock. The actual number of Shares to be distributed will be determined as of the Record Date. The Distribution will not affect the number of outstanding shares of Olin Common Stock or any rights of Olin shareholders. Federal Income Tax Consequences of the Distribution The Distribution is conditioned upon the receipt by Olin of an opinion from Cravath, Swaine & Moore, counsel to Olin, that for Federal income tax purposes: 1. The Distribution will qualify as a tax-free spin-off under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code"). 2. No gain or loss with respect to the Shares will be recognized by Olin on the Distribution. 3. No gain or loss will be recognized by the holders of Olin Common Stock solely as a result of their receipt of Shares in the Distribution. 4. The tax basis of the Olin Common Stock and the Shares (including any fractional Shares for which cash is received) held immediately after the Distribution by any holder will equal such holder's tax basis in its Olin Common Stock immediately before the Distribution, allocated in proportion to the relative fair market values of the Olin Common Stock and the Shares on the Distribution Date. 5. The holding period of the Shares received in the Distribution (including any fractional Shares for which cash is received) will include the holding period of the Olin Common Stock with respect to which the Shares were distributed, provided that such Olin Common Stock was held as a capital asset on the Distribution Date. 6. Cash received in lieu of fractional Shares will be treated as payment in exchange for such stock. The difference between the amount of cash received and basis allocable to such fractional Shares will be a capital gain or loss (long-term if the Olin Common Stock has been held for more than one year), as the case may be, provided that the Olin Common stock is held as a capital asset on the Distribution Date. This opinion of counsel is subject to certain assumptions and the accuracy of certain factual representations made by Olin and the Company. Neither Olin nor the Company is aware of any present facts or circumstances that would cause such assumptions or representations to be untrue. No ruling has been or will be sought from the Internal Revenue Service (the "IRS") with respect to the Federal income tax consequences of the Distribution, and there can be no assurance that the IRS will not take a position contrary to that expressed in the opinion of Cravath, Swaine & Moore. If the Distribution were not to qualify as a tax-free spin-off under Sections 355 and 368(a)(1)(D) of the Code, then (i) Olin would recognize capital gain equal to the excess of (x) the fair market value of the Shares on the Distribution Date, over (y) Olin's adjusted tax basis in the Shares on such date, and (ii) each holder of Olin 8 Common Stock who receives Shares in the Distribution would be treated as receiving a taxable distribution in an amount equal to the fair market value of such Shares on the Distribution Date, taxed first as a dividend to the extent of such holder's pro rata share of Olin's current and accumulated earnings and profits, and then as a nontaxable return of capital to the extent of such holder's basis in the Olin Common Stock, with any remaining amount being taxed as capital gain. Even if the Distribution qualifies as a tax-free spin-off under Sections 355 and 368(a)(1)(D) of the Code, Olin (but not Olin shareholders) also would recognize taxable gain on the Distribution (determined as if Olin had sold all the Shares for fair market value on the Distribution Date) if (a) 50% or more of the outstanding stock of the Company or Olin were acquired (or deemed to be acquired pursuant to certain transactions involving the stock or assets of Olin, the Company, or their subsidiaries), and (b) the Distribution and such acquisition were treated as part of a plan or series of related transactions (such a transaction, a "Change in Control Transaction"). For that purpose, any acquisition of stock of Olin or the Company within the period beginning two years prior to the Distribution Date and ending two years after the Distribution Date would be presumed to be part of such a plan or series of related transactions, although Olin or the Company, as the case may be, may be able to rebut such presumption. Pursuant to the Tax Sharing Agreement, the Company and Olin will each bear 50% of any corporate level tax arising on the Distribution, except that the Company or Olin, as the case may be, will be obligated to indemnify the other party on an after-tax basis for 100% of such corporate level tax if such tax is primarily attributable to (i) actions of the Company or Olin after the Distribution (including any cessation, transfer to affiliates or disposition of its active trades or businesses, and certain reacquisitions of its stock and payments of extraordinary dividends to its shareholders), (ii) involvement by the Company or Olin in a Change in Control Transaction, or (iii) the breach of one or more representations with respect to the Company or Olin made to Cravath, Swaine & Moore in connection with its opinion. Notwithstanding the Tax Sharing Agreement, under the consolidated return regulations, the Company and Olin will each be severally liable to the IRS for the full amount of any corporate level tax arising on the Distribution that is not paid by the other party. Neither the Company nor Olin will indemnify any holder of Olin Common Stock who receives shares in the Distribution for any tax liabilities. Certain restructuring transactions that Olin will effect prior to the Distribution will trigger tax liabilities, and other such transactions may trigger tax liabilities. Under the Tax Sharing Agreement, Olin will bear 100% of all such tax liabilities. It is not expected that such tax liabilities would be material, and Olin will adequately provide for all such liabilities prior to the Distribution. Current U.S. Treasury Regulations require each holder of Olin Common Stock who receives Company Common Stock pursuant to the Distribution to attach to his or her U.S. federal Income tax return for the year in which the Distribution occurs a detailed statement setting forth such data as may be appropriate in order to show the applicability of Section 355 to the Distribution. Following the Distribution, Olin will convey the appropriate information to each holder of record of Olin Common Stock as of the Record Date. This discussion of the anticipated Federal income tax consequences of the Distribution is for general information only and may not be applicable to shareholders who received their shares of Olin Common Stock through the exercise of an employee stock option or otherwise as compensation or who are not citizens or residents of the United States or who are otherwise subject to special treatment under the Code. Olin stockholders should consult their own advisers as to the specific tax consequences of the Distribution, including the effects of foreign, state and local tax laws and the effect of possible changes in tax laws. See also "Risk Factors--Certain Tax Risks of the Distribution." Listing and Trading of Company Common Stock There is not currently a public market for the Company Common Stock. The Company has applied for the listing of the Company Common Stock on the NYSE. Assuming such listing is approved, it is possible that trading may commence on a "when-issued" basis prior to the Distribution. On the first NYSE trading day 9 following the Distribution Date, "when-issued" trading in respect of Company Common Stock will end and "regular-way" trading will begin. The NYSE will not approve any trading in respect of Company Common Stock until the Securities and Exchange Commission (the "Commission") has declared effective the Company's Registration Statement on Form 10 (the "Registration Statement") in respect of the Shares. There can be no assurance as to the price at which the Company Common Stock will trade before, on or after the Distribution Date. Until the Company Common Stock is fully distributed and an orderly market develops in the Company Common Stock, the price at which such stock trades may fluctuate significantly and may be lower than the price that would be expected for a fully distributed issue. The price of the Company Common Stock will be determined in the marketplace and may be influenced by many factors, including without limitation (i) the depth and liquidity of the market for the Company Common Stock, (ii) developments affecting the chemical industry generally, (iii) developments affecting semiconductor demand, (iv) the Company's dividend policy, (v) investor perception of the Company and the industries in which the Company participates and (vi) general economic and market conditions. In addition, the combined trading prices of Company Common Stock and Olin Common Stock held by stockholders after the Distribution may be less than, equal to or greater than the trading price of Olin Common Stock prior to the Distribution. The Company initially will have approximately 9,100 stockholders of record based upon the number of stockholders of record of Olin as of December 31, 1998. For certain information regarding options to purchase Company Common Stock that will be outstanding after the Distribution, see "Relationship Between Olin and the Company After the Distribution--Employee Benefits Allocation Agreement" and "Management and Executive Compensation--Arch Chemicals, Inc. 1999 Long Term Incentive Plan." The Shares distributed to Olin shareholders will be freely transferable, except for Shares received by persons who may be deemed to be "affiliates" of the Company under the Securities Act of 1933, as amended (the "Securities Act"). Persons who may be deemed affiliates of the Company after the Distribution generally include individuals or entities that control, are controlled by, or are under common control with the Company and may include certain officers and directors of the Company. Persons who are affiliates of the Company will be permitted to sell their Shares only pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act, such as exemptions afforded by Section 4(2) of the Securities Act or Rule 144 thereunder. Third Party Consents; Regulatory Approvals In connection with the transfer of assets from Olin to the Company, certain consents may be required from third parties, including commercial customers. Olin has no reason to believe that these consents will not be obtained or that the failure to obtain such consents will be material to Olin or the Company. Federal procurement regulations will require Olin to enter into novation agreements with the Company and the U.S. Government relating to U.S. Government contracts to which Olin is a party, pursuant to which Olin will guarantee or otherwise become liable for the Company's obligations under such contracts which are being transferred to the Company in connection with the Distribution. See "Business--Novation of U.S. Government Contracts." Except for the U.S. Government consents set forth herein, Olin does not believe that there are any other material governmental regulatory approvals that will be required by law in connection with the Distribution. Reasons for Furnishing this Information Statement This Information Statement is being furnished by Olin solely to provide information to shareholders of Olin who will receive Shares in the Distribution. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any securities of Olin or the Company. The information contained in this Information Statement is believed by Olin and the Company to be accurate as of the date set forth on its cover. Changes may occur after that date, and neither Olin nor the Company will update the information except in the normal course of their respective public disclosure practices. 10 RISK FACTORS Certain factors, including those described below, should be considered carefully in evaluating the Company, the Company Common Stock and its businesses. Neither Olin nor the Company makes, nor is any other person authorized to make, any representation as to the future market value of the Shares. This Information Statement includes forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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 operates. Such forward-looking statements can be identified by the use of words such as "anticipates," "believes," "estimates," "expects," "forecasts," "plans," "projects," "should," "will," and variations of such words and similar expressions. All statements regarding Olin's or the Company's expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, projected costs and capital expenditures, competitive positions, growth opportunities for existing products, benefits from new technology, plans and objectives of management for future operations, and markets for stock are forward-looking statements. See, e.g., "The Distribution," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," "Legal Proceedings" and "Relationship Between Olin and the Company After the Distribution." Forward-looking 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. Olin and the Company undertake 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 1998, worsening economic conditions in Asia, customer acceptance of new products, efficacy of new technology, changes in U.S. and non-U.S. laws and regulations, costs or difficulties relating to the establishment of the Company as an independent entity and increased competitive and/or customer pressure, the Company's ability to maintain chemical price increases, higher- than-expected raw material costs for certain chemical product lines, increased foreign competition in the calcium hypochlorite markets and lack of stability in the semiconductor industry. Although Olin and the Company believe their expectations reflected in such forward-looking statements are based on reasonable assumptions, no assurance can be given that such expectations will prove to have been correct. Lack of Operating History as a Separate Entity Upon completion of the Distribution, the Company will own and operate the Specialty Chemical Businesses. These businesses have no operating history as a separate company, and have historically been able to rely on the earnings, assets and cash flow of the other businesses of Olin. In addition, the Company has not operated as a public company, and following the Distribution may incur additional costs and expenses associated with the management of a public company. Olin is not required to provide assistance or services to the Company except as described in the Distribution Agreement, the Transition Services Agreement and the other agreements entered into between the companies in connection with the Distribution. In addition, some of this assistance or these services may be terminated upon certain events, including a change in control of the Company. See "Relationship Between Olin and the Company After the Distribution." After the Distribution, each of Olin and the Company will be a smaller and less diversified company than Olin was prior to the Distribution. In addition, the Distribution may result in some temporary dislocation and inefficiencies to the business operations, as well as the organization and personnel structure, of each company. Finally, the Company will not have the right to use the Olin name except during a transition period. The Company has previously had the benefit of the Olin name and reputation in the marketing of its products and in dealings with government officials. One of the challenges facing the Company will be to develop an identity for itself independent of the Olin name. The Company may have to make additional advertising and promotion 11 expenditures to position its new name in its markets and cannot predict with certainty the extent to which the substitution of a new name may adversely affect its retention and acquisition of customers, its relations with governmental agencies or its financial performance. Dependence on the Semiconductor Industry Approximately 25% of the Company's 1997 sales were sales of microelectronic chemical products to companies that manufacture semiconductors for use in a variety of industrial and consumer electronic products. Such sales are dependent upon demand for semiconductors and a decrease in such demand will adversely affect the operating results of the Company. Over the past two years, prices for semiconductors have declined, putting pricing pressure on suppliers, such as the Company, to lower prices for microelectronic chemical products sold to such manufacturers. In addition, during such period, the Company believes that the number of semiconductors sold has not grown as quickly as in recent years and in the case of certain semiconductor devices, the number has actually declined. The future of the semiconductor market is difficult to predict. Accordingly, there can be no assurance that the continued decline in prices in the semiconductor industry (and the resulting increased pricing pressure on the Company) or a continued lack of growth or decrease in the number of semiconductors sold will not have a material adverse effect upon the Company. Environmental Liabilities 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, 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. In addition, U.S. state and federal authorities may seek fines and penalties for violation of these laws. The Company may be, from time to time, a party to governmental and private environmental actions associated with its waste disposal sites and manufacturing facilities. Charges to income for investigatory and remedial efforts were not material to operating results in 1997, 1996 and 1995 but may be material to net income in future years. Annual environmental-related cash outlays by the Company for site investigation and remediation, capital projects and normal plant operations are expected to range between $10 to $15 million over each of the next several years. While the Company does not anticipate a material increase in the projected annual level of its environmental-related costs, such increases may occur in the future and may have a material adverse effect on the Company's operating results and financial condition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Environmental." Ability to Satisfy Indemnification Obligations The Distribution Agreement and various other agreements entered into by Olin and the Company allocate responsibility between them for various debts, liabilities and obligations, including certain environmental liabilities. See "Relationship Between Olin and the Company After the Distribution." These agreements provide that the Company will indemnify Olin for the liabilities assumed by the Company pursuant to these agreements (including certain liabilities related to the Specialty Chemical Businesses which will be contingent liabilities of Olin by virtue of the structure of the Distribution) and Olin will indemnify the Company for the liabilities retained by Olin. However, the availability of such indemnities will depend upon the future financial strength of Olin and the Company. No assurance can be given that the relevant company will be in a position to fund such indemnities and if such company cannot fund such liability, such liability may fall on the other party, adversely affecting its financial condition or results of operations. 12 Certain Tax Risks of the Distribution The Distribution is conditioned upon the receipt by Olin of an opinion of its counsel that no gain or loss with respect to the Shares will be recognized by Olin on the Distribution. See "The Distribution--Federal Income Tax Consequences of the Distribution." However, such an opinion is not binding upon the IRS and is subject to certain assumptions, and to certain factual representations provided by Olin and the Company. If these assumptions and factual representations were incorrect in a material respect, the conclusions set forth in the opinion may not be correct. Neither Olin nor the Company is aware of any facts or circumstances which would cause such representations and assumptions to be untrue. The Company would be obligated to indemnify Olin on an after-tax basis for any corporate level tax arising on the Distribution if the Distribution fails to qualify as a tax-free spin-off primarily as a result of (i) an action taken by the Company (including any cessation, disposition or transfer to affiliates of its active trades or businesses, and certain reacquisitions of its stock and payments of extraordinary dividends to its shareholders), (ii) the Company's involvement in a Change in Control Transaction or (iii) the breach of one or more representations with respect to the Company made to Cravath, Swaine & Moore in connection with its opinion. See "Relationship Between Olin and the Company After the Distribution--Tax Sharing Agreement." Such tax liability would be substantial and there is no assurance that the Company would be able to satisfy its indemnification obligation. See "Risk Factors--Ability to Satisfy Indemnification Obligations." In addition, under the consolidated return regulations, the Company would be severally liable to the IRS for the full amount of any corporate level tax arising on the Distribution that is not paid by Olin. Furthermore, if the Distribution were not to qualify as a tax-free spin-off under Sections 355 and 368(a)(1)(D) of the Code, each holder of Olin Common Stock who receives Shares in the Distribution would be treated as if such stockholder received a taxable distribution in an amount equal to the fair market value of the Shares received, which would result in a dividend to the extent paid out of Olin's current and accumulated earnings and profits. International Operations 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. In addition, certain expenses are denominated in foreign currencies. As a result of its international operations, the Company is subject to risks associated with operating in foreign countries, including currency devaluations and fluctuations in currency exchange rates. Although such risks have not had a material adverse effect on the Company in the past, no assurance can be given that such risks will not have a material adverse effect on the Company in the future. The Company enters into forward sales and purchase contracts and currency options to manage currency risk resulting from purchase and sale commitments denominated in foreign currencies (principally Belgian franc, Canadian dollar, Irish punt and Japanese yen) and relating to particular anticipated but not yet committed purchases and sales expected to be denominated in those currencies. All of the currency derivatives expire within one year. Company Dividend Policy The payment and level of cash dividends by the Company after the Distribution will be subject to the discretion of the Board. Olin initially expects the Company to declare quarterly cash dividends of $0.20 per share. However, future dividend decisions will be based on, and affected by, a number of factors, including the operating results and financial requirements of the Company on an independent basis. As a result, there can be no assurance that the dividend will remain at its initial level. In addition, the payment of dividends may be restricted in certain circumstances by financial covenants contained in the Credit Facility. Absence of Trading Market for Company Stock There has not been any established public trading market for the Company Common Stock. The Company has applied for the listing of the Company Common Stock on the NYSE and it is anticipated that the Company Common Stock will be approved for listing on the NYSE under the symbol "ARJ." Trading in the Company 13 Common Stock to be distributed may commence on a "when issued" basis prior to the Distribution Date. There can be no assurance as to the prices at which the Company Common Stock will trade before, on, or after the Distribution Date. Until the Company Common Stock is fully distributed and an orderly market develops, the prices at which such stock trades may fluctuate significantly and may be lower than prices that would be expected for a fully distributed issue. Prices for the Company Common Stock will be determined in the marketplace and may be influenced by many factors, including, without limitation, the depth and liquidity of the market for the Company Common Stock, developments affecting the chemicals industry generally, developments affecting semiconductor demand, the Company's dividend policy, investor perception of the Company and the industries in which it participates and general economic and market conditions. Substantially all of the shares of Company Common Stock will be eligible for immediate resale in the public market after the Distribution. Any sales of substantial amounts of Company Common Stock in the public market, or the perception that such sales might occur, whether as a result of the Distribution or otherwise, could materially adversely affect the market price of Company Common Stock. See "The Distribution--Listing and Trading of Company Common Stock." Changes in Trading Prices of Olin Common Stock After the Distribution, Olin Common Stock will continue to be listed for trading on the NYSE and the Pacific and Chicago Stock Exchanges under the symbol "OLN." As a result of the Distribution, the trading prices of Olin Common Stock may be lower immediately following the Distribution as compared to the trading prices of Olin Common Stock immediately prior to the Distribution. The aggregate market values of Olin Common Stock and Company Common Stock after the Distribution may be less than, equal to, or greater than the market value of Olin Common Stock prior to the Distribution. Competition The Company's Specialty Chemical Businesses are in highly competitive industries, and the Company encounters strong competition in each of its product lines from other manufacturers worldwide. Certain of the Company's competitors are larger and have greater financial resources than the Company. See "Business." Certain Antitakeover Effects The Articles and By-laws of the Company, certain sections of the Virginia Stock Corporation Act and the Rights Agreement contain several provisions that may make the acquisition of control of the Company more difficult or expensive. See "Description of Capital Stock--Certain Provisions of the Articles, By-laws and Virginia Corporate Law" and "Rights Agreement." DIVIDEND POLICY The payment and level of cash dividends by the Company after the Distribution will be subject to the discretion of the Board. Although it is anticipated that following the Distribution the Company initially will declare quarterly cash dividends, which on an annual basis will aggregate $0.80 per Share, future dividend decisions will be based on, and affected by, a number of factors, including the operating results and financial requirements of the Company on an independent basis. As a result, there can be no assurance that the dividend rate will remain at its initial level. In addition, the payment of dividends, as well as any other distribution, liquidation, purchase or other acquisition of the Company's stock by it or any subsidiary, will be restricted in certain circumstances by negative covenants in the Credit Facility. 14 CAPITALIZATION The following table sets forth the combined capitalization of the Company as of September 30, 1998 on a historical basis and as adjusted to reflect (i) the Distribution and (ii) the assumption by the Company of $75 million of indebtedness incurred by Olin prior to the Distribution Date, as if they occurred as of that date. This data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical Combined Financial Statements and Notes thereto of the Company included elsewhere herein.
September 30, 1998 ---------------------------- Pro Forma As Actual Adjustments Adjusted ------ ----------- -------- (Dollars in Millions) Short-Term Borrowings $ .3 $ -- $ .3 Long-Term Debt 5.5 75.0 80.5 ------ ------ ------ Total Debt 5.8 75.0 80.8 ------ ------ ------ Common Stock -- 23.0 23.0 Additional Paid-In Capital -- 389.6 389.6 Cumulative Translation Adjustment (14.1) -- (14.1) Equity 487.6 (487.6) -- ------ ------ ------ Total Shareholders' Equity 473.5 (75.0) 398.5 ------ ------ ------ Total Capitalization $479.3 $ -- $479.3 ====== ====== ======
The foregoing table is based on each holder of Olin Common Stock receiving a dividend of one share of Company Common Stock for every two shares of Olin Common Stock. The pro forma number of shares is based on 45,922,864 shares of Olin Common Stock outstanding as of December 31, 1998. Prior to the Distribution, the Company will succeed to the Credit Facility established by Olin. Olin expects to have previously borrowed $75 million under the Five-year Facility, which liability will be assumed by the Company. The amounts remaining under the Credit Facility are expected to provide sufficient liquidity for the Company's current funding needs. The Credit Facility is expected to have various borrowing options and to contain customary commercial bank covenants, including certain restrictions on the payment of dividends by the Company. See "Business--Credit Facility." 15 ARCH CHEMICALS, INC. SELECTED FINANCIAL AND OPERATING DATA (Dollars in Millions) The following table summarizes certain selected historical financial and operating information with respect to the Company and is derived from the Combined Financial Statements of the Company. The financial data as of and for each of the three years ended December 31, 1997 were derived from the audited financial statements included elsewhere herein. The financial data for the nine months ended September 30, 1998 and 1997 were derived from the unaudited financial statements included elsewhere herein. Such historical financial data may not be indicative of the Company's future performance as an independent company. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical Combined Financial Statements and Notes thereto included elsewhere in this Information Statement. The historical financial information includes an allocated share of Olin's historical centralized activities. The following information is qualified in its entirety by the information and financial statements appearing elsewhere in this Information Statement.
Unaudited Nine Months Ended September 30, Years Ended December 31, ------------------ -------------------------------------- 1998 1997 1997 1996 1995 1994 1993 Operations -------- -------- ------ ------ ------ ------ ------ Sales $ 694.4 $ 728.1 $929.9 $913.5 $872.8 $686.5 $646.7 Cost of Goods Sold 493.7 525.8 676.3 647.8 659.6 515.1 484.6 Selling and Administra- tion 127.9 118.3 153.5 159.0 141.1 120.0 126.3 Charge for Strategic Ac- tion Plan(1) -- -- -- -- -- -- 25.0 Research and Development 13.1 15.5 21.1 21.0 17.4 12.5 14.9 -------- -------- ------ ------ ------ ------ ------ Operating Income (Loss) 59.7 68.5 79.0 85.7 54.7 38.9 (4.1) Interest and Other In- come, net(2)(3) 3.1 5.2 7.2 8.4 12.6 3.3 0.9 -------- -------- ------ ------ ------ ------ ------ Income (Loss) Before Taxes 62.8 73.7 86.2 94.1 67.3 42.2 (3.2) Income Tax Provision (Benefit) 21.4 25.6 29.9 33.0 23.4 14.7 (1.1) -------- -------- ------ ------ ------ ------ ------ Net Income (Loss) 41.4 48.1 56.3 61.1 43.9 27.5 (2.1) ======== ======== ====== ====== ====== ====== ====== Other Capital Expenditures 52.2 43.0 71.0 53.2 65.4 51.4 38.7 Depreciation 31.4 32.4 43.6 40.2 41.4 39.4 42.5 Effective Tax Rate 34.1% 34.7% 34.7% 35.1% 34.8% 34.8% 34.4%
Unaudited September 30, 1998 December 31, ------------------ ---------------------------------- 1997 1996 1995 1994 1993 Financial Position ------ ------ ------ ------ ------ Property, Plant and Equipment, net $305.1 $280.4 $257.3 $261.4 $225.5 $252.6 Total Assets 691.2 693.2 651.2 624.1 500.3 501.5 Capitalization (3): Short-Term Borrowings 0.3 1.4 1.8 0.1 0.4 7.7 Long-Term Debt 5.5 5.5 5.5 5.5 -- -- Equity and Cumulative Translation Adjustment 473.5 455.6 429.6 411.4 329.2 347.2 ------ ------ ------ ------ ------ ------ Total Capitalization 479.3 462.5 436.9 417.0 329.6 354.9 ====== ====== ====== ====== ====== ======
- -------- (1) Charge for strategic action plan includes a charge for personnel reductions and for streamlining existing businesses by relocating and consolidating several facilities. (2) Interest and other income, net in 1995 includes a gain 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. (3) The financial data above do not include any amount for borrowings or the related interest expense relating to the Credit Facility. Prior to the Distribution Date, Olin expects to borrow $75 million under the Five-year Facility, which liability will be assumed by the Company. See Notes to Combined Financial Statements--"Pro forma Effect of Borrowings under the Credit Facility (Unaudited)." 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations covers periods when the Company operated as the specialty chemical businesses of Olin. However, this discussion and analysis of financial condition and results of operations has been prepared as if the Company were a separate entity for all periods discussed. It should be read in conjunction with the Company's historical Combined Financial Statements and Notes thereto included elsewhere herein. Sales consist of sales to third parties net of any discounts. Gross Margin is defined as Sales less Cost of Goods Sold which include raw materials, labor, overhead and depreciation associated with the manufacture of the Company's various products. Other operating expenses include selling, administration, research and development. Results of Operations Combined
Unaudited Nine Months Ended September 30, Years Ended December 31, ----------------- -------------------------- 1998 1997 1997 1996 1995 -------- -------- -------- -------- -------- ($ in millions) Sales $ 694.4 $ 728.1 $ 929.9 $ 913.5 $ 872.8 Gross Margin 200.7 202.3 253.6 265.7 213.2 Selling and Administration 127.9 118.3 153.5 159.0 141.1 Research and Development 13.1 15.5 21.1 21.0 17.4 Operating Income 62.5 73.5 86.1 93.3 60.3 Net Income 41.4 48.1 56.3 61.1 43.9
- -------- Notes: (1) Operating income includes operating income and the equity income in affiliated companies. (2) The financial data above do not include any amount for borrowings or the related interest expense relating to the Credit Facility. Prior to the Distribution Date, Olin expects to borrow $75 million under the Five-year Facility, which liability will be assumed by the Company. See Notes to Combined Financial Statements--"Pro forma Effect of Borrowings under the Credit Facility (Unaudited)." Nine Months Ended September 30, 1998 Compared to 1997 Sales and operating income decreased 4.6% and 15.0%, respectively. Sales decrease was attributable to a 1% decrease in prices and a 5.9% 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, partially offset by a 2.3% increase in volume. 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 28.9% in 1998 and 27.8% 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 28.1% and 27.8%, respectively. Selling and administration expenses as a percentage of sales were 18.4% in 1998 and 16.2% in 1997. Selling and administration expenses increased in amount due to higher administration expenses for information technology systems 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. 17 The effective tax rate decreased to 34.1% in 1998 from 34.7% in 1997, resulting from a lower state tax rate in 1998. Year Ended December 31, 1997 Compared to 1996 Sales increased 1.8% while operating income decreased 7.7%. Sales increase was attributable to a 1.1% increase in prices and a 0.7% increase in volume. Gross margin percentage was 27.3% in 1997 and 29.1% in 1996. Higher raw materials and manufacturing costs more than offset the impact of increased volumes and contributed to the decreased gross margin percentage. Selling and administration expenses as a percentage of sales were 16.5% in 1997 and 17.4% in 1996. Selling and administration expenses decreased in amount due to lower advertising and sales promotion expenses for water chemicals, reduced legal expenses and lower international operating expenses. Research and development expenses were about equal. The effective tax rate decreased to 34.7% in 1997 from 35.1% in 1996 due to lower foreign taxes. In November 1997, the Company completed a transaction with BASF whereby the Company received $42 million for the sale of its performance chemicals' surfactants business and a three-year supply agreement. Of the proceeds received, $12 million was allocated to the sale of the surfactants business based on the fair value of such business and $30 million was allocated to the supply agreement. No gain or loss was recorded on the sale. In the supply agreement, the Company agreed to reserve production capacity for surfactants products at its Brandenburg, Kentucky facility and to supply BASF with such products in exchange for a $30 million payment made at the time of signing the agreement, plus recovery of all fixed and variable costs during the term of the agreement. The agreement expires on December 31, 2000 unless extended; the Company does not believe it will be extended. The $30 million payment was recorded as deferred income and is amortized ratably into operating income over the three-year term. Unless the supply agreement is extended beyond 2000, which the Company does not expect to happen, no future income will be realized with respect to this supply agreement after December 31, 2000. Year Ended December 31, 1996 Compared to 1995 Sales increased 4.7% while operating income increased 54.7%. The sales increase was attributable to a 2.8% increase in prices, a 1.7% decrease in volumes and a 3.6% increase due to the inclusion of sales for a full year from the acquisition of OCG Microelectronic Materials ("OCG") partially offset by the reduction in sales relating to the sale of the chlorinated isocyanurate pool chemical business in 1995. Gross margin percentage was 29.1% in 1996 and 24.4% in 1995, as higher prices, lower raw materials costs and an improved product mix contributed to the gross margin improvement. Selling and administration expenses as a percentage of sales were 17.4% in 1996 and 16.2% in 1995. Selling and administration expenses increased in amount due primarily to the inclusion of OCG's operating expenses for a full year and higher advertising and sales promotion expenses for water chemicals. Research and development expenditures increased due to the inclusion of OCG's research and development expenses for a full year in 1996. Other income in 1995 included the $7 million gain on the sale of the Company's chlorinated isocyanurate pool chemical assets (SUN(R) brand trademark, a dry sanitizer plant in South Charleston, West Virginia, and a related tableting operation in Livonia, Michigan). The effective tax increased to 35.1% in 1996 from 34.8%. 18 Microelectronic Chemicals
Nine Months Ended Years Ended September 30, December 31, ------------------ -------------------- 1998 1997 1997 1996 1995 -------- -------- ------ ------ ------ ($ in millions) Results of Operations Sales $ 176.5 $ 179.9 $242.6 $232.9 $168.1 Operating Income (Loss) (0.6) 9.2 9.5 16.9 21.0
Nine Months Ended September 30, 1998 Compared to 1997 Sales decreased 1.9% while an operating loss resulted in 1998 compared to an operating profit in 1997. Sales of all products weakened in the second and third quarters of 1998 as the Company's business continued to be adversely impacted by the poor conditions in the worldwide semiconductor market. Also, major semiconductor customers were undergoing extended shutdowns and some delaying or canceling fab construction projects. In addition to the market condition of the semiconductor industry, start-up costs for the Company's new process chemicals facility in Belgium, unfavorable operating performance from a foreign affiliate and higher administration expenses for information technology systems contributed to the operating loss. The existing market conditions in the semiconductor industry are expected to continue to negatively impact the microelectronic chemicals operations for the remainder of 1998. The Company is experiencing lower demand from customers whose products are sold directly into Asia. Additionally, the operating performance of the Company's foreign affiliate in Japan has been adversely impacted by the continued weakness in the semiconductor market. Year Ended December 31, 1997 Compared to 1996 Sales increased 4.2% while operating income decreased 43.8%. Since microelectronic chemicals sales are a direct result of the demand for semiconductor products, process chemicals sales increased as the semiconductor industry began to improve and recover from its depressed levels of 1996. Sales of chemical management services increased due to price increases and the addition of new customers and services. Higher photopolymer sales more than offset reduced demand from certain customers whose operations were undergoing technological changes and improvements. Operating income decreased as higher manufacturing costs at several plants, additional operating expenses and an unfavorable product mix more than offset the profit impact from the higher volumes and prices. Year Ended December 31, 1996 Compared to 1995 Sales increased 38.5% while operating income decreased 19.5%. Sales increased due to the inclusion of OCG's sales for twelve months in 1996 compared to six months in 1995. Operating income was negatively impacted by the semiconductor industry slowdown in the second half of 1996. Operating income was also affected by higher costs associated with delays and startup costs of the new Mesa, Arizona facility and the continued operations of two other manufacturing plants, until the Mesa facility became fully operational. Water Chemicals
Nine Months Ended Years Ended September 30, December 31, ----------------- -------------------- 1998 1997 1997 1996 1995 -------- -------- ------ ------ ------ ($ in millions) Results of Operations Sales $ 258.0 $ 253.6 $286.9 $293.7 $304.9 Operating Income 21.7 29.8 26.5 24.1 7.9
19 Nine Months Ended September 30, 1998 Compared to 1997 Sales increased 1.7% while operating income decreased 27.2%. Increased sales from international operations and higher volumes of Pace(R) brand products more than offset lower calcium hypochlorite volumes and prices. Chinese calcium hypochlorite producers have increased their exports of product, which has 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, along with higher distribution costs in connection with a new customer accounted for the increased manufacturing costs. Due to the fact that approximately 40% of the sales in the water chemicals business occur in the second calendar quarter of the year, the results of the Company's operations for the nine months ended September 30, 1998 and 1997 may not be indicative of the Company's full year results. Year Ended December 31, 1997 Compared to 1996 Sales decreased 2.3% while operating income increased 10.0%. The sales decline was attributable to reduced volumes of chlorinated isocyanurates ("iso") due to a strategy to enhance product mix and reduced volumes of calcium hypochlorite due to increased competition and unfavorable weather conditions. Lower volumes, principally from lower iso sales, more than offset higher prices. Operating income was higher due to the profit impact from the improved pricing, lower operating expenses and an improved product mix. Lower advertising, sales promotion and legal expenses along with lower international operating expenses due to lower spending and a stronger U.S. dollar contributed to the decrease in operating expenses. The increased pricing more than offset the higher cost of a raw material used in the production of Pace(R) brand products, and other additional manufacturing costs. Year Ended December 31, 1996 Compared to 1995 Sales decreased 3.7% while operating income increased significantly. The sales decline was primarily due to lower iso and calcium hypochlorite volumes which more than offset increased pricing. Iso sales declined as the Company began to transition out of the bulk isocyanurate business subsequent to the divestitures of the South Charleston manufacturing plant in 1995 and the Lake Charles facility in 1994. The Company's transition from being a manufacturer to a purchaser of iso's necessitated this strategy which enriched product mix. Pricing for domestic calcium hypochlorite and Pace(R) brand products increased and more than offset the decline in volumes. This price increase enhanced gross margin and, along with higher Pace(R) brand volumes, more than offset increased raw material, manufacturing and packaging costs and advertising and sales promotion expenses. Performance Chemicals
Nine Months Ended Years Ended September 30, December 31, ------------- -------------------- 1998 1997 1997 1996 1995 ------ ------ ------ ------ ------ ($ in millions) Results of Operations Sales $259.9 $294.6 $400.4 $386.9 $399.8 Operating Income 41.4 34.5 50.1 52.3 31.4
Nine Months Ended September 30, 1998 Compared to 1997 Sales decreased 11.8%, while operating income increased 20.0%. The sales decrease was attributable primarily to 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 20 volume in the Asian antidandruff agent market along with lower pricing due to the relatively stronger value of the U.S. dollar. The Company expects that the Asian economies will continue to adversely impact its antidandruff agent volumes for the remainder of 1998. The operating income increase was attributable primarily to the conversion of the flexible polyols business to a tolling operation. In addition, operating income increased by $4 million due to the conversion of the surfactants business to a contract manufacturing arrangement under a supply agreement with BASF which, unless extended, expires on December 31, 2000. This increase along with the profit impact from higher IPBC-based biocide and Copper Omadine(R) biocide volumes were offset in part by lower antidandruff agent volumes to the Asia market, and higher administration expense for additional international personnel and legal expenses. Year Ended December 31, 1997 Compared to 1996 Sales increased 3.5%, while operating income decreased 4.2%. Sales increase was due in part to higher volumes of antidandruff agents and marine antifoulant agents which benefited from capacity expansions, enabling many products to set annual production and sales records due to growth in market demand and market share. Higher specialty polyol sales were more than offset by lower flexible polyol sales. Additionally the Company's subsidiary in Venezuela was adversely impacted by approximately a 40% reduction in price for its product which is used in the production of oil emulsions. Higher propellant sales were due to increased volumes of Ultra Pure TM hydrazine and MMH. Sales and production of Ultra Pure TM hydrazine achieved record levels in 1997. Additional propellant volumes more than offset lower hydrate volumes and pricing. Sulfuric acid volumes were enhanced by the addition of a new refinery account and the Company becoming a sole supplier to another refinery. Operating income decreased due to higher raw material, maintenance and manufacturing costs and more than offset the profit impact from additional antidandruff agents, marine antifoulant agents and IPBC-based biocide volumes. In November 1997, the Company completed a transaction with BASF whereby the Company received $42 million for the sale of its performance chemicals' surfactants business and a three-year supply agreement. Of the proceeds received, $12 million was allocated to the sale of the surfactants business based on the fair value of such business and $30 million was allocated to the supply agreement. In the supply agreement, the Company agreed to reserve production capacity for surfactants products at its Brandenburg, Kentucky facility and to supply BASF with such products in exchange for a $30 million payment made at the time of signing the agreement plus recovery of all fixed and variable costs during the term of the agreement. The agreement expires on December 31, 2000 unless extended; the Company does not believe it will be extended. The $30 million payment was recorded as deferred income and is being amortized ratably into operating income over the three-year period. Unless the supply agreement is extended beyond 2000, which the Company does not expect to happen, no future income will be realized with respect to this supply agreement after December 31, 2000. Year Ended December 31, 1996 Compared to 1995 Sales decreased 3.2%, while operating income increased 66.6%. The sales decrease was attributable primarily to lower flexible polyol sales. This decrease more than offset higher worldwide volumes for antidandruff agents, marine antifoulant paints, coatings and adhesives for industrial uses, resulting from higher foreign, and new product sales, and higher prices and volumes of sulfuric acid. Ultra Pure TM hydrazine volumes increased over 1995 and benefited from a government contract. Operating income increased due to increased prices for glycols and polyols, higher volumes of surfactants and fluids, higher prices and volumes of sulfuric acid, and record operating profits from its Venezuelan subsidiary. Additionally, lower raw materials, manufacturing and operating costs contributed to the operating income improvement. Profits were negatively impacted due to the Company having to purchase supplemental product at higher prices from outside sources. In addition, higher operating costs came from toxicology studies in efforts to gain registrations for the new IPBC-based biocides. 21 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. In connection with the Distribution, Olin and the Company have entered into the Assumption of Liabilities and Indemnity Agreement which specifies that the Company is only responsible for 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 1997, 1996 and 1995 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 $10.8 million in 1997, $12.5 million in 1996 and $11.3 million in 1995. During 1997, $2.8 million ($4.0 million in 1996; $2.3 million in 1995) was spent on capital projects and $8.0 million ($8.5 million in 1996; $9.0 million in 1995) was spent on normal plant operations. Historically, the Company has funded its environmental capital expenditures through cash flow from operations and expects to do so in the future. The Company's combined balance sheets included liabilities for future environmental expenditures to investigate and remediate known sites amounting to $2.3 million, $3.2 million and $0.9 million at September 30, 1998, December 31, 1997 and December 31, 1996, respectively, 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. Total environmental-related cash outlays for 1998 are estimated to be $13 million, of which $5 million is expected to be spent on capital projects and $8 million on normal plant operations. Annual environmental-related cash outlays for site investigation and remediation, capital projects and normal plant operations are expected to range between $10 to $15 million over the next several years. While the Company does not anticipate a material increase in the projected annual level of its environmental-related costs, there is always the possibility that such increases may occur in the future in view of the uncertainties associated with environmental exposures. Environmental exposures are difficult to assess for numerous reasons, including the identification of new sites, developments at sites resulting from investigatory studies, advances in technology, changes in environmental laws and regulations and their application, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial capability of other potentially responsible parties and the Company's ability to obtain contributions from other parties and the lengthy time periods over which site remediation occurs. 22 Income Taxes Prior to the Distribution, the Company's operations were included in the U.S. federal consolidated income tax returns of Olin. The provision for income taxes includes the Company's allocated share of Olin's consolidated income tax provision and is calculated on a separate Company basis pursuant to the requirements of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Allocated current income taxes payable are settled with Olin on a current basis. Deferred taxes are provided for the differences between the financial statement and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Future Service Costs For a transition period following the Distribution, Olin and the Company will provide to one another certain services such as payroll and benefits administration, mainframe computing services and telecommunications support. Historically, these services were provided by Olin to the Company. Each company will be reimbursed for the services provided at rates comparable to the current intercompany accounting charges. By the end of such transition period, the Company will develop and establish these services on its own at costs that may be more or less than the rates charged by Olin. Costs for such services historically provided by Olin were $23.1 million and $23.9 million for the nine months ended September 30, 1998 and 1997, respectively and $31.8 million in 1997, $27.7 million in 1996 and $25.3 million in 1995. It is anticipated that when the Company becomes a separate public company, the cost of other types of services, in addition to these previously mentioned, will increase by approximately $4 million per year as a result of additional financial reporting requirements, stock transfer fees, directors' fees, insurance and executive compensation and benefits. Pro forma net income for the nine months ended September 30, 1998, would have been $38.9 million, as compared to the reported net income of $41.4 million, and pro forma net income for the year ended December 31, 1997, would have been $53.8 million, as compared to the reported net income of $56.3 million, after giving effect to the additional $4 million of annual pretax costs expected to be incurred in the future as a separate public company. Liquidity, Investment Activity and Other Financial Data Cash flows from operations supplemented by credit provided by Olin and proceeds from the sales of businesses were used to finance the Company's working capital requirements, capital and investment projects, and the 1995 acquisition of the remaining balance of OCG. In the past and until the Distribution, the Company's financing requirements have been and will be provided by Olin. Prior to the Distribution, the Company will succeed to the Credit Facility established by Olin. Olin expects to have previously borrowed $75 million under the Five-year Facility, which liability will be assumed by the Company. The amounts remaining under the Credit Facility are expected to provide sufficient liquidity for the Company's current funding needs. The Credit Facility is expected to have various borrowing options and to contain customary commercial bank covenants, including certain restrictions on the payment of dividends by the Company. See "Business--Credit Facility." Cash Flow Data
Nine Months Ended Years Ended September 30, December 31, ------------------ ---------------------- 1998 1997 1997 1996 1995 -------- -------- ------ ------ ------ ($ in millions) Provided By (Used For) Net Operating Activities $ 75.7 $ 30.8 $ 83.5 $ 86.1 $ 67.5 Capital Expenditures (52.2) (43.0) (71.0) (53.2) (65.4) Net Investing Activities (54.7) (43.1) (59.4) (49.4) (80.8) Net Financing Activities (26.6) 5.2 (21.6) (37.0) 16.4
23 For the nine months ended September 30, 1998, the increase in cash flow from 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 inventory levels resulting from the depressed semiconductor industry, along with reduced inventory levels of water chemicals, were the main contributors to the reduced investment in working capital. For the 1997 year, the decrease in cash flow from operating activities was primarily attributable to an additional investment in working capital to support higher accounts receivable and inventory levels in microelectronic chemicals, partially offset by a $30 million payment on a three-year supply agreement in connection with the sale of the surfactants business to BASF. In 1996, the increase in cash flow from operating activities was primarily attributable to higher operating income and a reduced investment in working capital. Capital spending for the nine months ended September 30, 1998 increased 21.4% from the comparable period in 1997. In microelectronic chemicals, there are two major capital projects: an ultra high-purity chemicals plant and distribution center in Zwijndrecht, Belgium to better serve the semiconductor industry in Europe and a photoresist facility in North Kingston, Rhode Island to support the rapid commercialization of advanced photoresist products. The high-purity chemicals plant in Belgium started up operations in the third quarter of 1998 while the photoresist facility in Rhode Island is expected to start up in the fourth quarter of 1998. These two projects were approved by Olin's Board of Directors in 1996 (Belgium) and 1997 (Rhode Island) and represent a total investment of approximately $50 million, of which approximately $20.5 million was spent during the first nine months of 1998. In performance chemicals, the Company is investing in a $55 million expansion plan over the next several years for the expanded capacity for key intermediate materials, including a new plant to be built in China to support increasing demand in China and the rest of Asia for antidandruff shampoos and other personal care products that use biocides. This plant is scheduled to be on stream in the year 2001. During the first nine months of 1998, $3.9 million was spent at the Rochester, New York and Swords, Ireland facilities related to the expanded capacity for key intermediate materials. Capital spending for the 1997 year increased 33.5%. During 1997, $20 million was spent in microelectronic chemicals for the Belgium and the Rhode Island facilities and approximately $5 million was spent for the Rochester, New York and Swords, Ireland facilities related to the expanded capacity for key intermediate materials used in the production of performance chemicals. Capital spending in 1996 decreased 18.7% from the prior year due to a planned reduction to control capital costs. Also contributing to this lower level of spending in 1996 was the completion of the Mesa, Arizona project in 1995. Capital spending in 1998 is estimated to increase approximately 40-50% from 1997. This increase is due primarily to the two microelectronic chemicals projects and spending for the performance chemicals expansion. In November 1997, the Company completed a transaction with BASF whereby the Company received $42 million for the sale of its performance chemicals' surfactants business and a three-year supply agreement. In 1996, the Company sold its electrostatics business, generating proceeds of $5.5 million. In 1995, the Company completed its acquisition for $64.6 million of Ciba- Geigy's 50% share of OCG, a joint venture formed by Ciba-Geigy and the Company in 1990. Also, the Company acquired the remaining 51% of Etoxyl, C.A., a Venezuelan joint venture. The purchase price is subject to adjustment based upon the future earnings of this venture. During 1995, the Company sold its Sun(R) brand trademark and its dry sanitizer plant in South Charleston, West Virginia, and a related tableting operation in Livonia, Michigan. These divestments generated total proceeds of $48.7 million. New Accounting Standards In June 1997, the Financial Accounting Standards Board issued SFAS No.131, "Disclosure about Segments of an Enterprise and Related Information," which establishes standards for the way that segment information is to be disclosed in financial statements along with additional information on products and services, geographic areas and major customers. The Company's current disclosure complies with this standard. 24 In February 1998, the Financial Accounting Standards Board issued SFAS No. 132 "Employers' Disclosures about Pensions and Other Post Retirement Benefits, an amendment to FASB Statements No. 87, 88, and 106," which modifies the disclosure requirements related to pensions and other post-retirement benefits. The statement is effective for fiscal years beginning after December 15, 1997. The Company is currently evaluating the changes in the disclosure requirements and will comply with the new standard for the year ended December 31, 1998. In 1998, the Financial Accounting Standards Board issued Statement No. 133 ("Statement 133") "Accounting for Derivative Instruments and Hedging Activities." It requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The Company is currently evaluating the effect this statement will have on its financial position and results of operations in the period of adoption. In 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 is effective for fiscal years beginning after December 15, 1998. The Company is currently evaluating the effect this Statement of Position will have on its financial position and results of operations in the period of adoption. Also in 1998, the AICPA issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-up Activities." This Statement of Position requires the expensing of certain costs such as pre-operating expenses and organizational costs associated with the Company's start-up activities, and is effective for fiscal years beginning after December 15, 1998. The effect of adoption is required to be accounted for as a cumulative effect of change in accounting principle. The Company is still evaluating the effect of this statement on results of operations and financial position. The Company does not expect however that the amount recognized as a cumulative effect of change in accounting principle, if any, would be material. After determining the effect of Statement 133, SOP 98-1 and SOP 98-5, the Company may consider early adoption of one or more of these pronouncements. Euro Conversion On January 1, 1999, eleven of the fifteen member countries of the European Union are scheduled to adopt the euro as their common legal currency and to establish fixed conversion rates between their existing sovereign currencies and the euro. The Company does not expect the conversion to the euro to have a material impact on its business, operations, or financial position. Derivative Financial Instruments The Company enters into forward sales and purchase contracts and currency options to manage currency risk resulting from purchase and sale commitments denominated in foreign currencies (principally Belgian franc, Canadian dollar, Irish punt and Japanese yen) and relating to particular anticipated but not yet committed purchases and sales expected to be denominated in those currencies. All of the currency derivatives expire within one year and are for United States dollar equivalents. At December 31, 1997, the Company had forward contracts to sell foreign currencies with face values of $4.1 million (1996-$22.4 million) and forward contracts to buy foreign currencies with face values of $5.1 million (1996-$23.3 million). At December 31, 1996, the Company had outstanding option contracts to sell foreign currencies with face values of $6.4 million and to buy foreign currencies with face values of $14.7 million. In accordance with Statement of Financial Accounting Standards No. 52 ("SFAS 52"), "Foreign Currency Translation," a transaction is classified as a hedge when the foreign currency is designated as, and is effective as, a hedge of a foreign currency commitment and the foreign currency commitment is firm. A hedge is 25 considered by the Company to be effective when the transaction reduces the currency risk on its foreign currency commitments. If a transaction does not meet the criteria to qualify as a hedge, it is considered to be speculative. For a foreign currency commitment that is classified as a hedge, any gain or loss on the commitment is deferred and included in the basis of the underlying instrument. Any realized and unrealized gains or losses associated with foreign currency commitments that are classified as speculative are recognized in the current period and are included in Selling and Administration in the combined statements of income. If a foreign currency transaction previously considered as a hedge is terminated before the transaction date of the related commitment, any deferred gain or loss shall continue to be deferred. Premiums paid for currency options and gains or losses on forward sales and purchase contracts are not material to operating results. Year 2000 Computer Systems The Company views the impact of the Year 2000 as a critical business issue. It manages the process by having each business identify its own Year 2000 issues and develop appropriate corrective action steps, while instituting a series of management processes that coordinate and manage the process across business boundaries and the corporate center. The process includes corporate oversight and provides for consistent attention to progress made against planned activities and a forum for issue resolution at the business and corporate levels with periodic assessments made by independent parties which are periodically reported to the Board. The Company recognizes that the Year 2000 issue is not limited to computer programs normally associated with the processing of business information, but can also be found in certain equipment and processes used in manufacturing and operation of facilities. Furthermore, it also recognizes that the potential exists for Year 2000 issues within the supply chain. The Company's approach was to subdivide the program into four distinct segments: 1) Business Systems; 2) Manufacturing; 3) Supply Chain; and 4) Infrastructure. In the business systems segment, the Company has positioned itself very favorably with respect to software and equipment that is Year 2000 compliant. In 1994, the Company began implementing a Year 2000 compliant client-server system, Peoplesoft, to address payroll and human resource needs and it presently uses such system in all businesses. Deployment of Peoplesoft was completed in 1997. In 1993, the Company began implementing for all domestic businesses a client-server system, SAP, for core business requirements as a vehicle to obtain certain improvements in the business processes. SAP is currently utilized in a majority of its domestic businesses. Since SAP was also a certified Year 2000 compliant solution, migration plans were adjusted to take advantage of the business benefit while eliminating the cost of remediating old legacy system code. Deployment has been aggressive with all domestic functions and locations transferred to SAP with the exception of the microelectronic chemicals business which is scheduled for January 1999. In the few instances where SAP is not utilized, replacement systems are scheduled for June 1999. Offshore processing systems will continue using existing systems until conversion to SAP during 2000 and beyond. All systems have been examined with Year 2000 upgrades targeted for completion by the second quarter of 1999. In the manufacturing segment, plant level employees and independent assessments were used to identify places where embedded systems exist and categorize them by the potential impact to the business. Forty-eight items which have the potential for causing process shutdowns or unsafe conditions remain to be remediated or replaced in the manufacturing segment. The plan, which takes maximum advantage of "planned outages" in order to minimize impact on operations, targets completion by May 1999. The supply chain segment has seen much activity in terms of assessing vendor Year 2000 preparedness, identifying alternate sources, as well as insertion of certain Year 2000 compliance language in all purchase orders issued. The Company is expecting to complete a review of single source and critical suppliers by year-end 1998. During 1999, the Company will continue to re- evaluate its suppliers on a periodic basis. Personal computers, networks, and PBX's represent the majority of items in the Company's infrastructure segment. The Company has deployed new Pentium Year 2000 compliant equipment in large numbers to support its SAP deployment program and for internal standards compliance. In addition, the Company is currently 26 utilizing software tools to test the entire PC inventory for Year 2000 compliance and this is expected to be completed by year end 1998. The Company's wide area network is already Year 2000 compliant as is most of it's PBX's and voice mail systems. The non-compliant equipment is planned to be replaced with compliant versions as leases expire but no later than June 1999. The Company believes its Year 2000 initiative is on track to address all significant Year 2000 issues by the middle of 1999, and is supported by the findings of an independent assessment completed in July 1998. The independent assessment does not address the accuracy of the Company's cost estimates. Plans include additional assessments throughout 1999. Plans for a worst case scenario in the unlikely event of a major failure due to a Year 2000 problem which causes significant disruptions to business operations have been formulated. In the area of business systems, management believes that the Company, with most of its' operating units already migrated to Year 2000 compliant solutions, has already significantly reduced its' potential risk. As added protection, software migration plans to new releases of SAP and Peoplesoft which are planned in 1999, include Year 2000 testing scenarios. It will continue to monitor progress in the system testing of the converted legacy systems and will redirect existing resources and/or utilize outside assistance in the event of slippage against plans. The Company continues to focus attention to the manufacturing segment. It has deployed several independent initiatives to identify embedded systems, develop comprehensive equipment lists, and obtain vendor certifications of Year 2000 compliance. It has developed plans for further testing with respect to key manufacturing equipment and systems, during periods of scheduled outages. The Company will continue to monitor progress against plans in the business systems, manufacturing, infrastructure, and supply chain segments, and take corrective action should slippage occur. The use of vendor-supplied Year 2000 compliant solutions, coupled with substantive pre-testing of key systems and a strong management commitment and oversight are the cornerstone of the Company's Year 2000 program. Nonetheless, in the unlikely occurrence of some unforeseen event, divisional emergency teams skilled in each of the disciplines will be formed during the last half of 1999. They will be deployed to assist local personnel in the event of a Year 2000 issue at the turn of the millennium. The Company does not expect Year 2000 initiative costs to exceed $10 million over the next 15 months, inclusive of the cost for continued deployment of SAP and related infrastructure. 27 BUSINESS General The Company was organized under the laws of the Commonwealth of Virginia on August 25, 1998 for the purpose of effecting the distribution of the Specialty Chemical Businesses to Olin's shareholders. The Company will be 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 will compete 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. Products and Services The Company's principal products and services fall within three businesses: microelectronic chemicals, water chemicals and performance chemicals. For financial information about each of the Company's industry segments, and foreign and domestic and export sales, see Notes to Combined Financial Statements--"Segment Information." The principal products of each business are described below. Microelectronic Chemicals The Company manufactures and supplies a range of products and services to semiconductor manufacturers and to flat panel display manufacturers throughout the world. The microelectronic chemicals sold by the Company include a variety of high purity acids, bases, oxidizers, etchants and solvents (collectively referred to as "process chemicals"). The Company plans to expand its process chemicals product line of ultra high purity, parts per trillion (ppt) chemicals in 1999. These leading edge products will service the newest generation semiconductor fabs. Another microelectronic chemical product line, referred to as diffusion systems, includes film deposition precursors, dopants, chlorine sources and chemical refill equipment. The Company also offers a range of semiconductor photopolymers, which include photoresists, ancillary materials and polyimides. In addition to the range of products offered, the Company provides semiconductor manufacturers with a variety of chemical usage related services, including inventory management and chemical handling. The Company manufactures a wide range of photoresist and ancillary products encompassing negative, g-line, i-line and 248nm deep UV technologies to meet the constantly evolving needs of the semiconductor industry. Within the past twelve months, the Company has announced new products based on two new series of 248nm deep UV resists, new advanced i-line products and environmentally- friendly strippers and has begun sampling both bi-layer and single-layer 193nm resist materials. The current focus of the photoresist research and development efforts is aimed at evolving the technology platforms underlying these products through modification of the respective materials chemistries to meet the ongoing demands of the semiconductor industry. The Company is pursuing advanced photoresist development through internal development, strategic alliances and licensing agreements. The Company's microelectronic chemicals business competes against other suppliers on the basis of performance, product quality, service, technology and pricing. The Company has a broad patent portfolio encompassing the technologies underlying the design of its products which the Company believes provides a competitive advantage against other suppliers. The Company enhances its technological competitive advantage by entering into technology licenses and joint development agreements with third parties to meet the rapidly evolving needs of the semiconductor industry. The current semiconductor industry downturn and the addition of several new suppliers to the market has significantly intensified price-based competition. Numerous programs have been implemented, are planned or 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 28 quality and the technology associated with quality are generally considered an industry prerequisite. The high quality standards of the semiconductor industry serve as a hurdle, which limit the number of new entrants as suppliers to the market. The Company's microelectronic chemicals are sold on a direct basis or through independent third party distributors. Chemical management services are offered on a direct basis only. Water Chemicals The Company manufactures and sells chemicals and distributes equipment on a worldwide basis for the sanitization and recreational use of residential and commercial pool water, and the purification of potable water. The Company sells both calcium hypochlorite and chlorinated isocyanurates for the sanitization of residential and commercial pool water. The Company is a leading worldwide producer of calcium hypochlorite with 65% to 70% available chlorine. The Company has a competitive advantage through ownership of the J3 technology which enables it to produce calcium hypochlorite with superior dissolving characteristics and 75% available chlorine as compared to calcium hypochlorite with 65% available chlorine. The Company owns widely recognized brand names for both calcium hypochlorite (HTH(R)) and chlorinated isocyanurates (Pace(R)). The Company's water chemical products are sold under a variety of brand names, including Company-owned trademarks such as Sock- It(R), Super Sock-It(R), Duration(R) and Pulsar(R). The Company's water chemical products are also distributed as private label brands. In addition to the pool water sanitizers calcium hypochlorite and chlorinated isocyanurates, the Company sells ancillary chemicals and accessories for the maintenance and recreational use of residential and commercial pools. The Company's water chemical products are also sold in the municipal water market for the purification of potable water. Currently, the Company sells calcium hypochlorite to purify potable water mainly outside the U.S. in a number of countries. The Company has plans to expand its presence in the municipal water market both domestically and internationally. Seventy-five percent of the Company's water chemical sales are within North America, and the remaining 25% are throughout the rest of the world. In North America, the Company sells water chemical products either directly to retail or through independent third party distributors. The Company also has subsidiaries and ownership interests in joint ventures in South Africa and Brazil which manufacture and distribute calcium hypochlorite to local markets. In addition to the manufacture and sale of water chemicals, the Company distributes chemicals, equipment, parts and accessories for pools mainly through two wholly owned subsidiaries. One subsidiary, Superior Pool Products, Inc., is headquartered in Anaheim, California with 18 locations throughout Arizona, California and Nevada. Another subsidiary, Hydrochim, S.A., located in France, distributes chemicals and equipment throughout Europe. Performance Chemicals The Company's performance chemicals business consists of the manufacture and sale of a broad range of products with diverse end uses. The performance chemicals sold by the Company are critical to the performance and value of the customer's end use products. As a result, there is a high level of operational integration with many customers. The performance chemicals business is characterized by technology driven product solutions that benefit specific customers and provide manufacturing flexibility. In addition, the business is characterized by close customer relationships with entities who are leaders in the markets in which they compete. The flexibility afforded by batch manufacturing in some operations combined with the Company's ability and willingness to provide superior technical support enables it to respond to the specific needs of a diverse group of customers. This gives the Company a competitive advantage over competitors whose manufacturing processes and related cost structure constrain their ability to respond cost effectively to smaller volume customers. Customers include industry leaders such as Procter & Gamble, Unilever and Uniroyal. 29 The Company's performance chemicals business manufactures flexible polyols, specialty polyols, urethane systems and glycol and glycol ethers. Flexible polyols, which are used in the furniture, bedding, carpet and packaging industries, are manufactured by the Company's wholly-owned, Venezuelan subsidiary for South American markets. Specialty polyols, which are used as an ingredient for elastomers, adhesives, coatings, sealants and rigid foam, are manufactured at the Company's Brandenburg, Kentucky site, as well as by its Venezuelan subsidiary. The Brandenburg facility also manufactures glycol and glycol ethers for use as an ingredient in cleaners, personal care products and antifreeze and provides specialty chemicals custom manufacturing for a small group of companies. The performance chemicals business also manufactures biocides that control the growth of micro-organisms, particularly fungus and algae, and control dandruff on the scalp. All of the biocide products are marketed under the well recognized trademarks, Omadine(R), Omacide(R) and Triadine(R) biocides. The majority of the biocide chemicals produced by the Company are based on the zinc, sodium and copper salts of the pyrithione molecule. These pyrithione- based biocides include over twenty products with differing concentrates, forms and salts and the Company is a worldwide leader in these biocide products. Other biocide chemicals are based on iodopropargyl-n-butylcarbamate ("IPBC"), a broad spectrum fungicide, which was introduced by the Company in 1995, and serves the metalworking fluids and coatings markets. The IPBC-based biocides currently consist of five variations with others in the development stages. Biocides make up a small portion of the customers' end products, and therefore must be highly effective at low concentrations as well as compatible with the formulation's other components. Meeting the biocide customer's needs requires a high degree of technical support and the expertise to do business in a highly regulated environment. The Company's ability to meet these needs makes it a preferred supplier in the high growth, anti-dandruff market. The Company is also uniquely positioned as the only pyrithione supplier with U.S. Environmental Protection Agency registrations for metalworking fluids, coatings and anti-foulant paints. The manufacturing flexibility of the biocides assets also permits the Company to offer fine chemical custom manufacturing services. The Company's performance chemicals business also supplies hydrazine hydrates as well as propellant grade hydrazine and hydrazine derivatives. Hydrazine hydrate products are sold for use in chemical blowing agents, water treatment chemicals, agricultural products, pharmaceutical intermediates and other chemical products. Hydrazine hydrates are produced at its Lake Charles, Louisiana production facility. The hydrazine hydrates are supplied in various concentrations, ranging from 51-100%, and packaging containers including bulk, tote bins and drums. The performance chemicals business also supplies propellant grade hydrazine and hydrazine derivatives for use as fuel in satellites, expendable launch vehicles and auxiliary and emergency power units. These propellant grade hydrazine products include Ultra Pure 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 30 display manufacturers, world-renowned consumer product companies, national and regional chemical and equipment distributors, other chemical manufacturers and the U.S. Government. See "Risk Factors--Dependence on the Semiconductor Industry." 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 shall be 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 hydrochloric acid, hydrogen peroxide, ammonia, isopropyl alcohol, acetone, tetraethylorthosilicate (TEOS), dichloroethylene (DCE), trichloroethane (TCA), phosphorous oxychloride (POCL/3/), hexamethyldisilazone (HMDS), custom polymers, photoinitiators, tetra methyl ammonium hydroxide (TMAH) and custom polyimide resins and photosensitizers. Water Chemicals. The principal raw materials for the water chemicals business include chlorine, sodium hydroxide, lime, urea and chlorinated isocyanurates. Chlorine and sodium hydroxide will be provided by Olin pursuant to the Chlor-Alkali Supply Agreement and with respect to the Company's Charleston facility, will be delivered via a pipeline from the adjacent Olin facility. The balance of the raw materials are purchased from other suppliers and are readily available. Performance Chemicals. The raw materials for the performance chemicals business include a variety of chemicals including propylene oxide, ethylene oxide, pyridine, iodine, propargyl butyl carbamate, chlorine, caustic soda, sulfur and ammonia. Electricity is the predominant energy source for the Company's manufacturing facilities and is supplied to the Company by public or government utilities. Natural gas used for steam production is an important energy source for the Company's Brandenburg, Kentucky site. Research and Development; Patents The Company's research activities are conducted at a number of facilities. Company-sponsored research expenditures were approximately $21.1 million, $21.0 million and $17.4 million for 1997, 1996 and 1995, respectively. In general, intellectual property is important to the Company, but no one technology, patent, or license or group thereof related to a specific process or product is of material importance to the Company as a whole. The Company believes that its broad patent portfolio in the microelectronic chemicals segment provides a sustainable competitive advantage for that product line. The Company owns three process patents for the technology relating to the manufacture of J3 calcium hypochlorite which are materially important to the water chemicals business. One of these patents expires in 2009 and the others expire in 2010. The Company owns a patent covering a process for producing Ultra Pure(TM) Hydrazine, the world's purest grade of anhydrous hydrazine, which makes it the preferred propellant for monopropellant satellite thruster applications. This patent expires in 2006. Seasonality Although the businesses of the Company as a whole are not seasonal in nature, 40% of the sales in the water chemicals business occur in the second quarter of the calendar year. The purchase of water chemical products by consumers in the residential pool market is concentrated in the United States between Memorial Day and the Fourth of July. In addition, the weather can also have a significant effect on water chemical sales during any given year. 31 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. Novation of U.S. Government Contracts As required by Federal procurement regulations providing for the U.S. Government to recognize the Company as the successor in interest to Olin on contracts between Olin and the U.S. Government, Olin will be required to enter into novation agreements with the Company and the U.S. Government which will provide, among other things, for Olin to directly or indirectly guarantee or otherwise become liable for the performance of the Company's obligations under such contracts which are being transferred to the Company in connection with the Distribution (the "Guaranteed Contracts"), including post-novation modifications to the Guaranteed Contracts. Such novation agreements also provide that the Company assumes all obligations under the Guaranteed Contracts and that the U.S. Government recognizes the transfer of such Guaranteed Contracts and related assets. While these Guaranteed Contracts are scheduled to be performed over a period of time, it is not expected that they will be fully and finally discharged for approximately two years. The Company has agreed in the Assumption of Liabilities and Indemnity Agreement to perform all of its obligations under each Guaranteed Contract and to indemnify Olin against any liability Olin may incur under the novation agreements by reason of any failure by the Company to perform such obligations. Competition The Company's microelectronic chemicals, water chemicals and performance chemicals businesses are in highly competitive industries, and the Company encounters strong competition with respect to each of its product lines from other manufacturers worldwide. This competition, from other manufacturers of the same products and from manufacturers of different products designed for the same uses, is expected to continue in both U.S. and foreign markets. More recently, the Company has experienced increased price competition as a result of the recent downturn in the semiconductor market. Depending on the product involved, various types of competition are encountered, including price, delivery, service, performance, product innovation, product recognition and quality. Overall, the Company regards its principal product groups to be competitive with many other products of other producers, and believes that it is an important producer of many such product groups. See "Risk Factors-- Dependence on the Semiconductor Industry." Export Sales The Company's export sales from the United States to unaffiliated customers were $93.6 million, $102.4 million and $92.8 million in 1997, 1996 and 1995, respectively. Employees As of December 31, 1997, the Company had approximately 2,950 employees, approximately 760 of whom were working in foreign countries. Approximately 390 of the hourly paid employees of the Company located at 32 its Brandenburg, Kentucky, Lake Charles, Louisiana, Shreveport, Louisiana and Beaumont, Texas facilities are represented, for purposes of collective bargaining, by several different labor organizations and the Company is party to nine labor contracts relating to such employees. These labor contracts extend for three or four year terms which expire in the years 2000, 2001 and 2002. No major work stoppages have occurred in the last three years. While relations between the Company and its employees and their various representatives are generally considered satisfactory, there can be no assurance that new labor contracts can be entered into without work stoppages. Environmental Matters The establishment and implementation of Federal, state and local standards to regulate air and water quality and to govern contamination of land and groundwater has affected, and will continue to affect, substantially all of the Company's manufacturing locations. Federal legislation providing for regulation of the manufacture, transportation, use and disposal of hazardous and toxic substances has imposed additional regulatory requirements on industry in general and particularly on the chemicals industry. In addition, the implementation of environmental laws, such as the Resource Conservation and Recovery Act, the Clean Air Act and the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, has required and will continue to require new capital expenditures and will increase operating costs. The Company employs waste minimization programs at most of its manufacturing sites. See the discussion of environmental matters contained in "Risk Factors--Environmental Liabilities" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Environmental." The Company and Olin have agreed, pursuant to the Distribution Agreement, that the Company will assume, and indemnify and hold Olin harmless against, all liabilities associated with the removal, remediation or control of environmental conditions at the Company's current facilities and at certain off-site locations. Such liabilities are not expected to have a material adverse effect upon the Company's financial condition or results of operations. See "Relationship Between Olin and the Company after the Distribution--Distribution Agreement." Credit Facility Prior to the Distribution, the Company is expected to succeed to two credit facilities, one of which is expected to be a $125 million, five-year revolving credit facility (the "Five-year Facility") and the other is expected to be a $125 million, 364-day credit facility (the "364-day Facility" and, together with the Five-year Facility, the "Credit Facility"), each established by Olin. Olin expects to have previously borrowed $75 million under the Five-year Facility, which liability will be assumed by the Company. Olin intends to use the proceeds for its own general corporate purposes, which may include share repurchases and future acquisitions relating to the Retained Businesses. The amounts remaining under the Credit Facility are expected to provide sufficient liquidity for the Company's current funding needs. It is expected that the Credit Facility will permit various borrowing options and will contain financial covenants restricting the amount of total leverage to earnings before interest, taxes, depreciation and amortization and limiting the ratio of earnings before interest, taxes, depreciation and amortization to interest expense and will contain negative covenants that, among other things, restrict the payment of dividends and repurchases of capital stock. 33 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 Blending facility for performance chemicals McIntosh, Alabama(1) Warehouse and office facility for Chandler, Arizona(2) microelectronic chemicals Mesa, Arizona Manufacturing facility for microelectronic chemicals Office and warehouse space for water chemicals Anaheim, California(2) Cheshire, Connecticut Research and development facility and offices Corporate headquarters Norwalk, Connecticut(2) Water chemicals service center Naperville, Illinois(2) Seward, Illinois Manufacturing facility for microelectronic chemicals Brandenburg, Kentucky Manufacturing facility for microelectronic and performance chemicals Lake Charles, Louisiana Manufacturing facility for performance chemicals Shreveport, Louisiana Manufacturing facility for performance chemicals Rochester, New York Manufacturing facility for performance chemicals East Providence, Rhode Manufacturing facility and materials research Island 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 Manufacturing facility for water chemicals Beaumont, Texas Manufacturing facility for performance chemicals Manufacturing facility for microelectronic Zwijndrecht, Belgium(1) chemicals and European technical support center Igarassu, Brazil Facility of a joint venture for the manufacture of water chemicals Salto, Brazil Repackaging facility for water chemicals and manufacturing facility for performance chemicals Amboise, France Repackaging, distribution and warehouse facility for water chemicals Swords, Ireland Manufacturing facility for performance chemicals Kempton Park, South Africa Facility of a joint venture for the manufacture of water chemicals Maricaibo, Venezuela Manufacturing facility for performance chemicals - -------- (1)Land is leased. (2) Leased. 34 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 which is to be leased from Olin and except for properties held by joint ventures as noted below. McIntosh, Alabama. The Company's facility located in McIntosh, Alabama blends, packages and stores propellant grade hydrazine products. Special hydrazine fuel blends are produced as the principal propellant for several U.S. Air Force launch vehicle programs including the Titan and Delta rockets. Mesa, Arizona. The Company has a state-of-the-art microelectronic chemical manufacturing facility in Mesa, Arizona. This facility manufactures, purifies, formulates and packages extensive product lines of ultra high purity process chemicals. This facility is ISO-9002 certified. A second facility for diffusion chemicals is under construction at Mesa. The Company expects this second facility to be ISO-9002 certified by the end of 1999. In addition to manufacturing operations, the Company has extensive analytical testing, applications testing and warehousing capabilities for both process and diffusion chemicals at the Mesa plant site. Current operations (including the diffusion chemicals plant under construction) occupy approximately 30 acres of the 52 acre plant site. The remaining acreage is available for future expansions. Brandenburg, Kentucky. The ISO 9000-certified Brandenburg plant covers an area of 200 acres, surrounded by 1,200 acres of land which provides both a buffer zone and expansion capability. The plant contains multiple manufacturing facilities producing a wide range of products. Many of these products are derivatives of ethylene oxide and propylene oxide. A broad line of specialty polyols are produced in a flexible batch facility and sold into urethane coatings, adhesives, sealant and elastomer applications. Chemical intermediates for the Company's microelectronic materials business are produced in a separate manufacturing facility dedicated to this purpose. There is a research and development center at the site which supports the development and technical service needs of the polyol and glycol products and new product scale up for the microelectronics business. Ethylene oxide is produced on site in a facility owned by Sun Company and operated by the Company. The Company also operates other facilities on the site to produce commodity and specialty chemicals for third parties under long-term contractual arrangements. Lake Charles, Louisiana. The Company's facility located in Lake Charles, Louisiana consists of three manufacturing plants that produce various hydrazine products. One ISO 9002-certified plant, built in 1979, produces solution grade hydrazine products for use in chemical blowing agents, water treatment chemicals, agricultural products, pharmaceutical intermediates and other chemical products. A second ISO 9002-certified plant, built in 1953, produces propellant grade hydrazine products including anhydrous hydrazine (AH), unsymmetrical dimethyl hydrazine (UDMH) and monomethyl hydrazine (MMH) for use as fuel in satellites, expendable launch vehicles and auxiliary power units. A third plant, built in 1988, produces propellant grade Ultra Pure(TM) Hydrazine (UPH), the world's purest grade of anhydrous hydrazine, for satellite propulsion. Shreveport, Louisiana. This ISO 9002-certified plant produces industrial grade virgin sulfuric acid for delivery to the U.S. Gulf Coast and provides regeneration services primarily to local refineries. In addition, this site provides non-hazardous waste fuel burning services and markets sodium bisulfite solution. Rochester, New York. This facility manufactures a large number of chemicals for the specialty chemicals industry. Many of these chemicals are biocides used to control the growth of microorganisms, particularly, fungus and algae and to control dandruff on the scalp. The largest 2-chloropyridine production facility in the world is located here. 2-Chloropyridine is the key intermediate used to produce the Company's Omadine(R) biocides. These products are based on the salts of the pyrithione molecule. The Company manufactures over a 35 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 and multiple sized formulation vessels available here. North Kingston, Rhode Island. This facility is located in a new industrial park in North Kingston, Rhode Island (Quonset Point Industrial Park) which originally housed a distribution warehouse. A new state-of-the-art manufacturing facility and product development center for advanced photoresists is being built on-site in 1998 to expand the Company's capabilities in the development and manufacture of advanced technology photoresists. A technical service center is located on site with advanced photolithography equipment identical to that of the customer base and provides technical service support to North America. The equipment is also used by the advanced product development groups to develop state-of-the-art products in anticipation of customer requirements. The manufacturing plant will receive raw materials and will formulate, filter and package finished goods in a high purity, clean environment. Full test capabilities are located on-site or at the nearby East Providence facility. The high degree of flexibility required to custom manufacture specific products is maintained through the number of and multiple sized formulation vessels available here. Packaging and manufacturing facilities were designed for a new generation of purity requirements. The Company is in the process of applying for ISO 9001 certification for the site. Charleston, Tennessee. The Company's ISO 9002-certified facility located in Charleston, Tennessee produces, packages, and stores calcium hypochlorite for the water chemicals business. There are two distinct manufacturing operations at this site. One produces our 65% (nominal) available chlorine product while the other produces our patented, 75% high available chlorine product. Products are packaged into containers that range in size from 5 pounds to 2,000 pounds per container. The site also stores as much as 10-14 million pounds of product during peak periods. Purchased chemicals are also stored in warehouses at this site. These products, along with those manufactured at the site, are often combined on shipments to meet the requests of customers. Beaumont, Texas. The company is a major regional manufacturer and supplier of industrial grade virgin sulfuric acid to the U.S. Gulf Coast and provides regeneration services primarily to local refineries. In addition, the Company provides limited hazardous and non-hazardous waste fuel burning services and markets sodium bisulfite solution. This facility has achieved and maintained ISO 9002 certification since 1993. Zwijndrecht, Belgium. The original facility located in Zwijndrecht, Belgium has been operational since 1993 and primarily manufactures, tests, and provides technical support for photoresists, photoresist developers, and photoresist strippers used in the semiconductor industry. In 1998, the facility was expanded to manufacture and test high purity acids, etchants, and diffusion chemicals also used in the semiconductor industry. This expanded facility is ISO 9002-certified. A technical service center is also located on the site with photolithography equipment identical to that of the customer base and provides technical service support to European customers. 36 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. 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. Maricaibo, Venezuela. The Company's ISO 9000-certified facility in Venezuela is a multi product manufacturing plant producing a broad range of polyols and surfactants to support regional markets. Specialty polyols are also produced for local consumption and export. LEGAL PROCEEDINGS At the time of the Distribution, the Company will assume from Olin, pursuant to the Distribution Agreement, liabilities related to specific legal proceedings. As a result, although Olin will remain the named defendant, the Company will manage the litigation and indemnify Olin for costs, expenses and judgments arising from such litigation. Most of these proceedings have arisen in the ordinary course of business and involve claims for money damages. While the results of litigation cannot be predicted with certainty, the Company does not believe these matters or their ultimate disposition will have a material adverse effect on its combined financial condition, profitability or liquidity, as applicable. 37 RELATIONSHIP BETWEEN OLIN AND THE COMPANY AFTER THE DISTRIBUTION The Company was organized by Olin as a wholly owned subsidiary in anticipation of the Distribution. After the Distribution, Olin will not have any ownership interest in the Company, and the Company will be an independent public company. Prior to the Distribution, the Company and Olin will enter into certain agreements, described below, for the purpose of giving effect to the Distribution, governing their relationship subsequent to the Distribution and providing for the allocation of employee benefits, tax and certain other liabilities and obligations arising from periods prior to the Distribution. While the agreements contain terms which are thought to be comparable to those which would have been reached in arms-length negotiations with unaffiliated parties, these agreements were reached while the Company was wholly owned by Olin and therefore are not the result of arm's-length negotiations between independent parties. Following the Distribution, additional or modified agreements, arrangements and transactions may be entered into by the Company, Olin and their respective subsidiaries. Any such future agreements, arrangements and transactions will be determined through arm's-length negotiation between the parties in the ordinary course. Copies of the forms of the principal agreements between the Company and Olin are filed as exhibits to the Company's Registration Statement filed with the Commission registering the Company Common Stock (and associated Rights) under the Exchange Act. The following description summarizes certain terms of such agreements, but the following descriptions do not purport to be complete and are qualified in their entirety by reference to such exhibits. Distribution Agreement Olin and the Company will enter into a Distribution Agreement providing for, among other things, certain corporate transactions required to effect the Distribution and other arrangements between Olin and the Company subsequent to the Distribution. The Distribution Agreement provides for, among other things, the transfer by Olin to the Company of the assets and business entities comprising the Specialty Chemical Businesses and the assumption of liabilities and cross indemnities designed to place with the Company responsibility for liabilities of the Specialty Chemical Businesses and with Olin responsibility for liabilities of the Retained Businesses and prior discontinued businesses of Olin. The assets of the Specialty Chemical Businesses will be transferred to the Company on an "as is, where is" basis and no representations will be made by Olin with respect thereto. The Distribution Agreement also provides that prior to the Distribution, the Company will assume $75 million of indebtedness expected to be incurred by Olin pursuant to the Credit Facility. The Distribution Agreement also provides for the allocation of coverage between the Company and Olin under existing insurance policies after the Distribution and sets forth procedures for the administration of insured claims. The Distribution Agreement provides that the Distribution is conditioned upon the satisfaction of several conditions, including (1) certain transactions (including the transfers of assets and liabilities contemplated by the Distribution Agreement) having been consummated in all material respects; (2) the Shares having been approved for listing on the NYSE, subject to official notice of issuance; (3) the Registration Statement having become effective under the Exchange Act and no stop order or similar proceeding being in effect or instituted for such purpose; (4) all material regulatory approvals necessary to consummate the Distribution shall have been received and be in full force and effect; (5) no order, preliminary or permanent injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Distribution shall be in effect and no other event shall have occurred or failed to occur that prevents the consummation of the Distribution; (6) the Company's Board of Directors, as described in this Information Statement, shall have been elected by Olin, as sole shareholder of the Company, and the Articles, By-laws and 38 Rights Agreement shall be in effect; (7) the Olin Board of Directors shall have formally approved the Distribution; (8) each of the Charleston Services Agreement, the Chlor-Alkali Supply Agreement, the Covenant Not to Compete Agreement, the Employee Benefits Allocation Agreement, the Tax Sharing Agreement, the Intellectual Property Transfer and License Agreement, the Information Technology Services Agreement, the Trade Name Agreement and the Transition Services Agreement shall have been executed and delivered by the applicable parties; and (9) receipt by Olin of an opinion from Cravath, Swaine & Moore substantially in the form described in the section "Federal Income Tax Consequences of the Distribution." If the conditions are not satisfied, Olin could decide to cancel the Distribution or waive the conditions and complete the Distribution. Even if all the above conditions are satisfied, Olin has reserved the right to cancel or defer the Distribution and the related transactions described in this Information Statement at any time prior to the Distribution Date. The foregoing conditions are for the sole benefit of Olin and shall not give rise to any duty on the part of Olin or its Board of Directors to waive or not waive such conditions or in any way limit Olin's right to terminate the Distribution Agreement or alter the consequences of any such termination. The Distribution Agreement also provides that, subject to certain exceptions, the Company and Olin have each agreed to assume and indemnify and hold the other harmless from and against, all damages, losses, liabilities, fines, penalties, costs and expenses arising out of or associated with the business, conduct, operations, assets, properties or status of the Company or Olin, respectively, prior to, on or after the Distribution. The Distribution Agreement further provides that the Company will assume, and indemnify and hold Olin harmless from, certain liabilities in connection with the removal, remediation or control of environmental conditions at the Company's current facilities and at certain off-site locations. See "Business--Environmental Matters." The Distribution Agreement provides that each of Olin and the Company will be granted access to certain records and information in the possession of the other. The Distribution Agreement provides that, in general, except as otherwise set forth therein or in any related agreement, all costs and expenses incurred in connection with the Distribution will be paid by Olin. Charleston Services Agreement As part of the Distribution, Olin's Charleston, Tennessee plant site which contains several manufacturing facilities will be divided between Olin and the Company. As a result, the Company and Olin will enter into a Charleston Services Agreement pursuant to which the Company and Olin will provide each other with services in connection with the continued operations at this site. The services to be provided include environmental services, water treatment services, steam power, administrative services regarding the plant site, and raw material storage. Some of the services are being provided for a transitional period. The fees for the services vary by service but generally are at cost. Chlor-Alkali Supply Agreement Olin and the Company will enter into a supply agreement whereby Olin will supply to the Company chlorine and caustic soda for the Company's plants. Under the terms of the agreement, Olin will supply all of the Company's requirements for chlorine and caustic soda for a five-year period, with extensions unless canceled on two years' prior notice by either party. Purchases of electrochemical units (ECUs) of chlorine and caustic soda will be at a fixed price which approximates the current market price. Excess chlorine purchases will be at Olin's then lowest price for comparable volumes of chlorine sold to third parties. Covenant Not To Compete Agreement The Company and Olin will enter into a Covenant Not to Compete Agreement ("Covenant Not to Compete Agreement") which generally provides that for a period of five years after the Distribution Date (i) Olin shall not, with certain limited exceptions, directly or indirectly manufacture, sell, market or distribute products or product-related services that are the same as or substantially similar to those which the Specialty Chemical Businesses are manufacturing, selling, marketing or distributing at the time of the Distribution and (ii) the Company shall not, with certain limited exceptions, directly or indirectly manufacture, sell, market or distribute 39 products or product-related services that are the same as or substantially similar to those which Olin's Retained Businesses are manufacturing, selling, marketing or distributing at the time of the Distribution. The Covenant Not to Compete Agreement also provides that, for a period of two years after the Distribution Date, neither Olin nor the Company shall solicit, recruit, hire or induce to leave any of the other's employees, subject to certain limited exceptions. Employee Benefits Allocation Agreement Olin and the Company will enter into an employee benefits and compensation allocation agreement (the "Employee Benefits Allocation Agreement") which sets forth the manner in which assets and liabilities under employee benefit plans and other employment-related liabilities will be divided between them. In general, the Company will be responsible for compensation and employee benefits relating to its employees but not persons who became former employees of the Specialty Chemical Businesses prior to the Distribution. The Company will receive no assets under employee benefit plans except as provided below. Certain liabilities relating to former employees of the Company will be retained by Olin (along with any corresponding assets), including liabilities and assets for defined benefit pension plan benefits accrued by employees of the Specialty Chemical Businesses who ceased to be Olin employees prior to the Distribution, liabilities and assets under the Olin Corporation Contributing Employee Ownership Plan and the corresponding supplemental executive plan for such former employees and unfunded deferred compensation liabilities for such persons. The Company intends to establish its own pension plan and related trust for its employees and will assume the pension liabilities for these persons from Olin. Olin will transfer assets from its tax-qualified pension plan trust to the Company's pension trust relating to the Company's employees who were previously participants in Olin's tax-qualified pension plan. Olin's obligations relating to nonqualified, unfunded pension liabilities for Company employees who were prior employees of Olin will also be assumed by the Company. However, since these are unfunded obligations, no assets will be transferred from Olin to the Company with respect to these obligations. The Company further intends to establish its own long-term disability plan and related trust for its employees. The Company will assume the liability for long-term disability benefits for employees of the Company and for former employees of Olin who were employed in the Specialty Chemical Businesses. Olin will transfer a proportionate amount of assets from its tax qualified Voluntary Employee Benefit Association Trust ("VEBA") based on an equitable allocation. The Employee Benefits Allocation Agreement also provides for the treatment of outstanding employee stock options to purchase Olin Common Stock ("Olin Options"). At the time of the Distribution, with limited exceptions, Olin Options will be converted into adjusted Olin Options ("New Olin Options") and employee stock options to purchase Company Common Stock ("Company Options"), with adjustments to preserve the "intrinsic value" inherent in the Olin Options immediately prior to the Distribution. Options (including Olin Options) held by Company employees will be provided under an Arch Plan. The Company will be responsible for delivering shares of Company Common Stock upon exercise of Company Options, and Olin will be responsible for the delivery of shares of Olin Common Stock upon exercise of New Olin Options. The holders of restricted stock units of Olin Common Stock ("Olin Restricted Units") (whether employed by the Company or Olin after the Distribution) will be entitled to receive a distribution of units of Company Common Stock ("Company Restricted Units") in the same proportion as the Distribution Ratio with respect to their Olin Restricted Units, and the Company Restricted Units so distributed and representing shares of Company Common Stock will generally be subject to the same restrictions as the Olin Restricted Units. The Employee Benefits Allocation Agreement also provides for the treatment of employee obligations and benefit plans of certain employees of the Company in the manner described under "Management and Executive Compensation--Pension Plans" and "Management and Executive Compensation--Savings Plan." Intellectual Property Transfer and License Agreement The Company and Olin will enter into an intellectual property transfer and license agreement (the "Intellectual Property Transfer and License Agreement"), which provides for the transfer by Olin to the Company of certain intellectual property and proprietary technology and certain trademarks relating to the 40 Company's businesses. The Intellectual Property Transfer and License Agreement provides for the grant of licenses by the Company to Olin to use such transferred intellectual property and technology in certain of Olin's retained businesses following the Distribution and for the granting of licenses between Olin and the Company relating to the use of certain intellectual property and technology. Information Technology Services Agreement The Company and Olin will enter into an information technologies services agreement (the "Information Technology Services Agreement") pursuant to which the Company will provide Olin after the Distribution Date with certain computer and communication services previously provided by Olin prior to the Distribution. These services include data center services, computer software and hardware technical support and network operations support. The agreement will have an initial term of two years with limited exceptions for certain services, related to third party contracts, which will extend beyond two years. Services are to be provided on a cost allocation basis. Sublease The Company and Olin will enter into a Sublease whereby the Company will sublease office space from Olin at Olin's Norwalk, Connecticut headquarters on substantially the same terms as Olin's lease with its landlord. Tax Sharing Agreement The Company and Olin will enter into a Tax Sharing Agreement providing that Olin will be responsible for the Federal tax liability of the Company for each year that the Company was included in Olin's consolidated Federal income tax return, and for state, local and foreign taxes of the Company attributable to periods prior to the Distribution, in each case including tax subsequently assessed pursuant to the audit of, or other adjustment to, previously filed tax returns. The Tax Sharing Agreement will also provide that the Company and Olin will each bear 50% of any corporate level tax arising on the Distribution, except that the Company or Olin, as the case may be, will be obligated to indemnify the other party on an after-tax basis for 100% of such corporate level tax if such tax is primarily attributable to (i) actions of the Company or Olin after the Distribution (including any cessation, transfer to affiliates or disposition of its active trades or businesses, and certain reacquisitions of its stock and payments of extraordinary dividends to its shareholders), (ii) involvement by the Company or Olin in a Change in Control Transaction, or (iii) the breach of one or more representations with respect to the Company or Olin made to Cravath, Swaine & Moore in connection with its opinion. Notwithstanding the Tax Sharing Agreement, under the consolidated return regulations, the Company and Olin will each be severally liable to the IRS for the full amount of any corporate level tax arising on the Distribution that is not paid by the other party. Trade Name License Agreement The Company and Olin will enter into a tradename and trademark license agreement (the "Trade Name License Agreement") to permit the Company and its subsidiaries to use the "Olin" name and its derivatives on a royalty-free basis in certain limited circumstances for a certain limited period of time. Transition Services Agreement The Company and Olin will enter into a transition services agreement (the "Transition Services Agreement") pursuant to which Olin and the Company will provide each other with certain services which have been provided by Olin and the Company prior to the Distribution. The length of time for which any such service shall be provided, and the compensation therefor, vary based upon the mutual agreement of the Company and Olin. Pursuant to Olin's management of the receipts and disbursements of the Company for an interim period which is not expected to exceed six months, periodic intercompany indebtedness may arise in an amount which is not expected to exceed $25 million. 41 MANAGEMENT AND EXECUTIVE COMPENSATION Board of Directors The following table sets forth information as to persons who serve or who are expected to serve as directors of the Company immediately following the Distribution. The Company's Board of Directors will be comprised of seven directors, only one of whom will be an officer of the Company. Currently, six individuals have been selected as directors, and the seventh director will be selected prior to the Distribution Date. The following table contains information concerning the six directors selected as of the date hereof.
Name and Age Year Term Expires ------------ ----------------- Michael E. Campbell, 51 2002 Richard E. Cavanagh, 52 2001 John W. Johnstone, Jr., 65 2000 Jack D. Kuehler, 65 2000 H. William Lichtenberger, 62 2002 John P. Schaefer, 64 2002
Mr. Campbell will serve as Chairman of the Board and Chief Executive Officer of the Company following the Distribution. He is currently Executive Vice President of Olin and has global management responsibility for all of Olin's businesses. Prior to his election as Executive Vice President, Mr. Campbell served as President of the Microelectronic Materials Division. Mr. Campbell joined Olin in 1978 as Counsel in the Chemicals Group Legal Department, following his association with Howrey & Simon, a law firm in Washington, D.C. In 1981, he was named Group Counsel for Olin's Consumer Products. The Consumer Product businesses were consolidated into the Chemicals Group in 1983 and he was then appointed Group Counsel for the Chemicals Group. Three years later he was named Vice President Administration and assumed additional responsibility for the Human Resource department in the Chemicals Group. In 1987, Mr. Campbell was elected Olin's Corporate Vice President, Human Resources, reporting to Olin's Chief Executive Officer. He is a graduate of the University of New Hampshire and received a J.D. degree from George Washington University. He is also a director of Westvaco Corporation. Mr. Cavanagh is President and Chief Executive Officer of The Conference Board, Inc., a leading research and business membership organization. He has held this position since November 1995. Previously, he was Executive Dean of the John F. Kennedy School of Government at Harvard University for eight years. Prior to the position with Harvard, he spent 17 years with McKinsey & Company, Inc., the international management consulting firm, where he led the firm's public issues consulting practice. Mr. Cavanagh is a Trustee of the BlackRock Mutual Funds. He is also a Trustee of Wesleyan University and The Educational Testing Service and a director of Fremont Group, Olin and The Guardian Life Insurance Company. He holds a BA degree from Wesleyan University and an MBA degree from the Harvard Business School. Mr. Johnstone retired in April 1996 as Chairman of the Board of Olin. In 1954, he joined Hooker Chemicals and Plastics Corporation, where he spent 22 years in various sales, marketing and management positions of increasing responsibility, leaving in 1975 to become President of the Airco Alloys division of Airco, Inc. He joined Olin in 1979 as Vice President and General Manager of the Chemicals Group's Industrial Products department. Mr. Johnstone became a corporate Vice President and President of the Chemicals Group in 1980, and an Executive Vice President of Olin in 1983. He was named President of Olin in 1985, Chief Operating Officer in 1986, Chief Executive Officer in 1987 and Chairman of the Board in 1988. He is a graduate of Hartwick College, where he received a BA degree in chemistry and physics and a Doctor of Science (Hon.). He has attended the Harvard Business School's Advanced Management Program. Mr. Johnstone is a trustee of Hartwick College and Research Corporation Technologies, Inc. He is former Chairman of the Soap and Detergent Association and the Chemical Manufacturers Association. He is a director of Phoenix Home Life Mutual Insurance Company, McDermott International, Inc., Fortune Brands, Inc. and Olin. 42 Mr. Kuehler retired in 1993 as Vice Chairman of the Board of International Business Machines Corporation, a computer manufacturing corporation. He joined IBM in 1958 as an associate engineer in the San Jose Research Laboratory. Over the years, he played a significant management role in many of the corporation's advanced technologies. He served as Director of the Raleigh Communications Laboratory, Director of the San Jose Storage Products Laboratory and President of the Systems Product Division. In 1980, he was elected an IBM Vice President and named President of the General Technology Division. He became a member of the IBM Board in 1986, Executive Vice President in 1987, Vice Chairman and member of the Executive Committee in 1988 and President in 1989. He resumed the title of Vice Chairman in January 1993. He is a member of the National Academy of Engineering, a fellow of the Institute of Electrical and Electronics Engineers and a trustee of Santa Clara University (from which he graduated with a BS degree in mechanical engineering and an MS degree in electrical engineering). He is a director of Aetna Life and Casualty Company, Olin and the Parsons Corporation. Mr. Kuehler holds an honorary doctorate of science from Clarkson University and an honorary doctorate of engineering science from Santa Clara University. Mr. Lichtenberger is Chairman and Chief Executive Officer of Praxair, Inc., an industrial gases company, a position he assumed in 1992 when Praxair was spun off from Union Carbide Corporation. In 1986, Mr. Lichtenberger was elected a Vice President of Union Carbide Corporation and was appointed President of the Union Carbide Chemicals and Plastics Company, Inc. He was elected President and Chief Operating Officer and a director of Union Carbide Corporation in 1990. He resigned as an officer and director of Union Carbide Corporation upon Praxair's spin-off. Mr. Lichtenberger is a graduate of the University of Iowa where he majored in chemical engineering and has a masters degree in business administration from the State University of New York, Buffalo. He is a director of Ingersoll-Rand Company and Olin. He is on the Advisory Board of Western Connecticut State University, a director of the National Association of Manufacturers and a member of The Business Roundtable. He is a director of the Fairfield County Boy Scouts Advisory Board. Mr. Schaefer is President of the Research Corporation, a foundation, and Chairman of Research Corporation Technologies, Inc. Previously, he was President of the University of Arizona (1971-1982) and Professor of Chemistry at the University where he had been a member of the faculty since 1960. Before his appointment as President of the University, he served as head of its Department of Chemistry and Dean of its College of Liberal Arts. Dr. Schaefer received his BS degree in chemistry from the Polytechnic Institute of Brooklyn in 1955 and his Ph.D. degree from the University of Illinois in 1958. After postdoctoral studies at the California Institute of Technology, he taught chemistry at the University of California (Berkeley). Dr. Schaefer's research interests have been in the area of synthetic and structural chemistry. He served on the Board of Governors of the U.S.-Israeli Binational Science Foundation (1973-1978). He is a director of Olin, Research Corporation and Research Corporation Technologies, Inc. Effective with the Distribution, Messrs. Cavanagh, Johnstone, Kuehler, Lichtenberger and Schaefer will cease to be members of the Board of Directors of Olin. Committees of the Board of Directors The Company will be managed under the direction of its Board. The Company's By-laws also provide for an Audit Committee, Compensation Committee and a Corporate Governance Committee. The Audit Committee will be composed solely of directors who are not employees of the Company or any of its subsidiaries. The Audit Committee will advise the Board on internal and external audit matters affecting the Company, including recommendation of the appointment of independent auditors of the Company; review with such auditors the scope and results of their examination of the financial statements of the Company, and any investigations and surveys by such auditors; and review the presentation of the Company's financial results. The committee will also review and evaluate the investment and financial performance of the Company's pension plan and CEOP funds, review and approve investment policies with respect to the Company's pension plan and CEOP funds, approve the selection of CEOP investment options, consult with, and obtain reports from, the 43 pension plans' and CEOP trustees and other fiduciaries. The committee will also advise the Board on government and other compliance programs, on corporate and governmental security matters, and monitor major litigation with a particular interest in the event there are claims that the Company has acted unethically or unlawfully. The members of the Audit Committee are expected to be Messrs. Johnstone and Schaefer (chair). A new, third director is expected to be named to this committee at a later date. The Compensation Committee will set policy, develop and monitor strategies for and administer the programs which compensate the Chief Executive Officer (the "CEO") and other senior executives of the Company. The committee, comprised solely of outside directors, will approve the salary plans for the CEO and other senior executives including total direct compensation opportunity and the mix of base salary, annual incentive standards and long term incentive awards. It will approve the measures, goals, objectives, weighting, payout matrices and actual payouts and will certify performance for and administer the incentive compensation plans. The Committee will administer the Arch Chemicals, Inc. 1999 Long-Term Incentive Plan described herein and the Arch Chemicals, Inc. Stock Option Plan described herein, including making grants of awards thereunder. It will also administer the Company's Contributing Employee Ownership Plan ("CEOP") described herein and the Company's Stock Plan for Nonemployee Directors described herein, issue the annual report on executive compensation, approve executive employment and change in control agreements, approve and adopt new qualified and nonqualified pension plans and approve amendments and terminations of such pension plans. The committee will also advise the Board on remuneration for members of the Board. The members of the Compensation Committee are expected to be Messrs. Cavanagh, Kuehler and Lichtenberger (chair). The Corporate Governance Committee will assist the Board in fulfilling its responsibility to the Corporation's shareholders relating to the selection and nomination of Directors, make recommendations to the Board regarding the election of the Chief Executive Officer, reviews the nominees for other offices of the Company, annually evaluate the performance of the Chief Executive Officer, periodically review corporate governance trends, issues and best practices and make recommendations to the Board regarding the adoption of best practices most appropriate for the governance of the affairs of the Board, recommend to the Board a slate of nominees to be proposed for election to the Board by shareholders at annual meetings and at other appropriate times, recommend individuals to fill any vacancies created on the Board, make recommendations to the Board regarding the size and composition of the Board and the particular qualifications and experience that might be sought in Board nominees, assess whether the qualifications and experience of candidates for nomination and renomination to the Board meet the then current needs of the Board, seek out possible candidates for nomination and consider suggestions by shareholders, Management, employees and others for candidates for nomination and renomination as Directors, review and make recommendations to the Board regarding the composition, duties and responsibilities of various Board committees from time to time as may be appropriate, review and advise the Board on such matters as protection against liability and indemnification, and assess and report annually to the Board on the performance of the Board itself as a whole. This committee will consider candidates recommended by shareholders for election as directors at annual meetings. Such recommendations must be in writing and submitted to the Secretary of the Company by December 1, accompanied by a biography and the written consent of the candidate. The members of the Corporate Governance Committee are expected to be Messrs. Cavanagh, Johnstone (chair), Kuehler, Lichtenberger and Schaefer. A new director is expected to be named to this committee at a later date. Compensation of Directors Each director who is not an employee of the Company will receive an annual retainer of up to $30,000 and a fee of up to $1,500 for each meeting of the Board and for each meeting of a committee of the Board attended, together with expenses incurred in the performance of his or her duties as a director. Each director who serves as the chair of a Board committee may also receive an additional annual meeting fee of up to $5,000. The Board may determine that all or a portion of the retainer will be paid in Company Common Stock. Subject to the consent of the Board, each director may elect to receive the balance thereof in cash or Company Common Stock. All meeting fees may be payable in cash or Company Common Stock, at the election of the director with the approval of the Board. Directors, with the approval of the Board, may defer the cash portions of their annual 44 retainer and meeting fees into cash accounts which will bear interest and/or into stock accounts which will be credited with dividend equivalents. The Company's Stock Plan for Non-employee Directors described elsewhere herein also provides that each non-employee director serving in such capacity on January 1 of each year will be credited with or will receive a number of shares of Company Common Stock, stock options, performance shares or a combination of the foregoing as determined by the Board following the Distribution. See "Management and Executive Compensation--Stock Plan for Non- employee Directors." Directors who are not officers or employees of Olin or one of its subsidiaries are covered while on Company business under Olin's business travel accident insurance policy which covers employees of the Company generally. Executive Officers of the Company Set forth below is certain information as to the Company's executive officers who will serve as such after the Distribution. Effective with the Distribution, such individuals will resign from any position then held with Olin.
Name and Age Position ------------ -------- Michael E. Campbell, 51 Chairman of the Board and Chief Executive Officer Leon B. Anziano, 55 President and Chief Operating Officer Sarah Y. Kienzle, 40 Vice President, Strategic Development Mark A. Killian, 51 Vice President, Human Resources Louis S. Massimo, 41 Vice President and Chief Financial Officer Sarah A. O'Connor, 39 Vice President, General Counsel and Secretary
For information regarding Mr. Campbell, see "Management and Executive Compensation--Board of Directors." Mr. Anziano has served as a Corporate Vice President of Olin since April 29, 1993 and in April 1998 was also given the additional title of President of Olin's Specialty Chemical Businesses. Previously he served as President of the Chlor-Alkali Products Division of Olin. Prior to the Distribution, Mrs. Kienzle served as a Corporate Vice President of Olin since September 25, 1997. Prior to that time, since August 1996, she was a Vice President of SRI Consulting, a consulting firm, where she had responsibility for the chemical industry strategy consulting practice. Since 1993, she was employed as a Manager and later a Principal of A.T. Kearney, Inc., a consulting firm, where she managed operations consulting for certain industrial clients. Since prior to 1993 she held various managerial positions at Amoco Chemical Company, a chemicals manufacturing corporation, where her responsibilities included commercial development, capital investment and product line management. Prior to the Distribution, Mr. Killian served as Director, Human Resources for Olin since his appointment in February 1991. Mr. Massimo was elected Controller of Olin effective April 1, 1996 and, in addition, a Corporate Vice President effective January 1, 1997. Since November 1994 and until April 1996, he had served as Olin's Director of Corporate Accounting. Since prior to 1993, he was an Audit Senior Manager for KPMG LLP, an accounting firm, where he had overall responsibility for services provided in connection with audits, Commission filings, and merger and acquisition activities for certain multinational clients. 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. 45 Compensation of Executive Officers The Company was formed on August 25, 1998. The following table discloses compensation received by the Company's Chief Executive Officer and the four other most highly compensated executive officers of the Company (the "Named Executive Officers") for services rendered to Olin for the fiscal year ended December 31, 1998. Summary Compensation Table
1998 Annual Compensation Long Term Compensation ------------------------------ ---------------------- Awards(a) Payouts ------------ ------------ Name and Principal Securities Position with Olin Other Annual Underlying LTIP All Other at December 31, 1998 Salary Bonus Compensation(b) Options(c) Payouts Compensation(d) - -------------------- -------- ----- --------------- ------------ ------------ --------------- Michael E. Campbell $425,004 (e) $17,743 50,000 $ 207,140 $ 32,168 Executive Vice President Leon B. Anziano $301,668 (e) $15,265 20,000 $ 203,733 $125,755 Vice President and President, Specialty Chemicals Division Sarah Y. Kienzle $225,000 (e) $ 0 20,000 $ 0 $ 60,591 Vice President, Planning and Development Mark A. Killian $186,400 (e) $ 1,537 7,500 $ 63,507 $ 13,095 Director, Human Resources Louis S. Massimo $200,004 (e) $ 0 12,500 $ 0 $ 12,214 Vice President and Controller
- -------- (a) All awards shown reflect an equitable adjustment made pursuant to the anti-dilution provisions of the plans for a 2-for-1 stock split effective October 30, 1996 and an equitable adjustment made pursuant to such provisions as a result of the spin-off of Primex Technologies, Inc. (b) Includes dividend equivalents on outstanding performance share units paid at the same rate as dividends paid on Olin Common Stock. Also includes tax gross-ups paid for imputed income on use of company-provided automobiles. (c) The stock options reported are for Olin Common Stock and do not represent options to acquire Company Common Stock. In the event options are exercised and shares of Olin Common Stock are issued prior to the Record Date, the option holder will receive Company Common Stock in the Distribution on the same basis as all other shareholders of record of Olin Common Stock on the Record Date. (d) Amounts reported in this column for 1998 are comprised of the following items:
Olin Contributing Olin Supplemental Olin Value of Split- Employee Contributing Olin Term Dollar Life Ownership Plan Employee Life Insurance Company Match Ownership Plan(1) Insurance(2) Premiums(3) ----------------- ----------------- ------------ -------------------- M. E. Campbell $8,310 $11,756 $1,390 $10,712 L. B. Anziano 8,258 6,594 1,390 6,125 S. Y. Kienzle 3,067 5,563 1,303 1,422 M. A. Killian 5,941 313 1,087 5,754 L. S. Massimo 5,038 4,613 1,158 1,405
- -------- (1) The Olin Supplemental CEOP permits participants in the CEOP to make contributions, and Olin to match the same, in amounts permitted by the CEOP but which would otherwise be in excess of those permitted by certain Internal Revenue Service limitations. (2) Under Olin's key executive insurance program, additional life insurance is provided and monthly payments are made to the spouse and dependent children of deceased participants. (3) The amount of the premium shown represents the full dollar amount of the premium Olin paid in 1998 for the whole life insurance and to fund the retiree death benefit. Such amounts also include retroactive premiums which Olin paid to cover a period of time during which some premiums were suspended due to the financial instability of the insurance carrier. The figure for Mr. Anziano includes $103,388 of relocation payments (including tax gross-ups) made under Olin's relocation policy in connection with Mr. Anziano's relocation from Olin's Cleveland, Tennessee office to its Norwalk, Connecticut headquarters. The figure for Mrs. Kienzle includes $49,236 of relocation payments (including tax gross-ups) made under Olin's relocation policy in connection with her move from Chicago, Illinois to Olin's Norwalk, Connecticut headquarters. (e)Bonus amounts for 1998 have not yet been determined. 46 Option Grants of Olin Common Stock to Company Executives in Last Fiscal Year The following table sets forth as to the Named Executive Officers information relating to options granted by Olin from January 1, 1998 through December 31, 1998. In addition, options to purchase Olin Common Stock outstanding under the 1980 Stock Option Plan of Olin for such persons will be extended to terminate upon the earlier of (i) the end of their term or (ii) two years following the Distribution. Options to purchase Olin Common Stock granted under Olin's 1988 Stock Option Plan (the "1988 Plan") and 1996 Stock Option Plan (the "1996 Plan") will not terminate for such persons when the optionee ceases to be employed by Olin but instead will be extended to their original terms. See "Management and Executive Compensation--Adjustment to Prior Olin Equity-Based Benefits."
Individual Grants(a) ------------------------------------------------------------------------------------- % of Total Number of Options Securities Granted Potential Realizable Value at Underlying to All Assumed Rates of Stock Price Options Employees Appreciation for Option Term(d)(e) Granted in Fiscal Exercise Expiration ------------------------------------------ Name (a,b) Year Price(c) Date 0% 5% 10% ---- ---------- ---------- -------- ---------- ------------------------- ----------------- M. E. Campbell 50,000 6.0% $43.13 1/28/08 0 $ 1,356,211 $ 3,436,906 L. B. Anziano 20,000 2.4% $43.13 1/28/08 0 542,485 1,374,762 S. Y. Kienzle 20,000 2.4% $43.13 1/28/08 0 542,485 1,374,762 M. A. Killian 7,500 1.0% $43.13 1/28/08 0 203,432 515,536 L. S. Massimo 12,500 1.5% $43.13 1/28/08 0 339,053 859,226 All Stockholders N/A N/A N/A N/A 0 1,245,622,105 3,156,650,978 All Optionees 835,700 100.0% $43.05 (f) 0 22,734,571 57,511,296
- -------- (a) Options were awarded to the Named Executive Officers on January 29, 1998. One-third of the grant becomes exercisable on each January 28 beginning in 1999. (b) Under the 1996 Plan, the Compensation Committee of Olin's Board of Directors, in its discretion, may grant stock appreciation rights ("SAR's") to optionees. To date, no such SAR's have been granted. Each such right will relate to and have the same terms and conditions, including restrictions, as a specific option granted, together with such additional terms and conditions as the Compensation Committee may prescribe. (c) The exercise price of the options reflects the fair market value of Common Stock on the date of grant. (d) No gain to the optionees is possible without appreciation in the stock price which will benefit all shareholders commensurately. The dollar amounts under these columns are the result of calculations at the 5% and 10% assumption rates set by the Commission and therefore are not intended to forecast possible future appreciation of Olin's stock price or to establish any present value of the options. (e) Realizable values are computed based on the number of options which were granted in 1998 and which were still outstanding at year-end. (f) The expiration dates of options granted during fiscal 1998 are January 29, 2008, May 1, 2008 and September 24, 2008. 47 Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values The following table sets forth as to the Named Executive Officers information regarding options to purchase Olin Common Stock exercised during 1998 and the value of in-the-money outstanding options to purchase Olin Common Stock at the end of 1998.
Number of Securities Aggregate Value of Underlying Unexercised Unexercised, In-the-Money Options at 12/31/98 Options at 12/31/98(a) ------------------------- ------------------------- Shares Acquired Value Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable - ---- ----------- -------- ----------- ------------- ----------- ------------- M. E. Campbell 4,289 $95,473 88,446 90,325 $133,078 $0 L. B. Anziano 0 0 44,643 40,163 38,952 0 S. Y. Kienzle 0 0 3,334 26,666 0 0 M. A. Killian 0 0 13,219 15,565 4,257 0 L. S. Massimo 0 0 11,477 23,238 0 0
- -------- (a) Value was computed as the difference between the exercise price and the $28.3125 per share closing price of Olin Common Stock on December 31, 1998, as reported on the consolidated transaction reporting system of the NYSE. Adjustment to Prior Olin Equity-Based Benefits Pursuant to the Employee Benefits Allocation Agreement, at the time of the Distribution, Olin Options will generally be converted into both an option to purchase Company Common Stock and an option to purchase Olin Common Stock with adjustments designed to preserve the "intrinsic value" at the time of the Distribution as the old award. The Company will be responsible for delivering shares of Company Common Stock upon exercise of Company Options, and Olin will be responsible for the delivery of shares of Olin Common Stock upon exercise of New Olin Options. See "Relationship Between Olin and the Company After the Distribution--Employee Benefits Allocation Agreement." Options granted under the Olin 1980 Stock Option Plan to Olin employees who become Company employees upon the Distribution will terminate upon the earlier of (i) the end of their term or (ii) two years following the Distribution. Options granted to such employees under the Olin 1988 Stock Option Plan or the Olin 1996 Stock Option Plan will expire at the end of the original term of the option rather than terminate when the employee ceases to be an Olin employee. Options granted to such employees under the Olin 1996 Stock Option Plan which are not yet vested at the time of the Distribution will continue to vest in accordance with their respective vesting schedules so long as the optionee remains employed at the Company. Employees of Olin who become employees of the Company and who were participating in Olin's EVA Incentive Plan (Management Incentive Compensation Plan) will, assuming performance objectives are satisfied, receive annual incentive bonus awards in respect of 1998 performance. All Company employees holding Olin Performance Unit Plan retention units consisting of phantom shares of Olin Common Stock will have those units accelerated and the units will be paid out in the form of Olin Common Stock prior to the Record Date. Restricted stock unit awards granted to Olin employees which have not yet vested will receive restricted stock units of the Company in the same proportion as the Distribution Ratio bears to restricted stock units held. Deferred Olin phantom stock accounts, including Olin director accounts, will also be credited with Company phantom stock also in the same proportion as the Distribution Ratio bears to phantom stock held in the accounts. Stock Plan for Nonemployee Directors Each nonemployee member of the Board will receive an annual retainer of up to $30,000, all or part of which may be paid or credited in the form of shares of Company Common Stock as provided in the Stock Plan for Nonemployee Directors (the "Directors Plan") at the election of the Board. Generally speaking, the Directors Plan (i) provides for the granting annually, at the election of the Board, of a number of shares of Company Common Stock, options to purchase shares of Company Common Stock, performance shares or a combination of the foregoing (as determined by the Board following the Distribution) to each nonemployee director and, in the case of a grant of shares of Company Common Stock, the deferral of the payment of such shares until after 48 such director ceases to be a member of the Board, (ii) permit the Board to determine if all or part of the annual retainer shall be paid in shares of Common Stock, (iii) permits such director, subject to the approval of the Board, to elect to receive his or her quarterly meeting fees in the form of shares of Company Common Stock in lieu of cash, (iv) permits such director, subject to the approval of the Board, to elect to receive in the form of shares of Company Common Stock the amount by which the annual retainer exceeds the amount payable in shares of Company Common Stock ("Excess Retainer") in lieu of cash for such excess and (v) permits such director, subject to the approval of the Board, to elect to defer any meeting fees and Excess Retainer paid in cash and any shares to be delivered under the Directors Plan. Interest on deferred cash and dividends on deferred shares are paid to the Non-employee Director unless the director, subject to the approval of the Board, elects to defer such amounts in which case interest is credited quarterly and dividend equivalents are reinvested in phantom shares of Company Common Stock on the dividend payment date. Deferred shares are paid out in shares of Company Common Stock. Performance shares vest and are paid out, unless deferred by the director, upon the satisfaction of performance goals established by the Compensation Committee. Deferred accounts under the Directors Plan are paid out if there is a "Change in Control" as defined in such plan. Existing accounts under The Olin Corporation 1997 Stock Plan for Non-employee Directors (including Olin phantom shares) held for the benefit of individuals who become non-employee directors of the Company will be transferred to the Directors Plan. Pension Plans Following the Distribution, the Company will establish a tax-qualified, defined benefit pension plan for Company employees ("Tax Qualified Pension Plan") that will provide benefits based on service with Olin and with the Company. The Company will become liable for the payment of all pension plan benefits accrued by Company employees prior to and following the Distribution who cease to be Company employees after the Distribution. Olin will transfer assets to the Company's pension plan and the amount of the assets will be equal to the Company's proportionate share of the assets (based on an allocation of assets used to fund projected benefit obligations), provided that in no event will the amount transferred be less than the amount required using the asset allocation methodology set forth in Section 4044 of the Employee Retirement Income Security Act of 1974, as amended. The Tax Qualified Pension Plan, together with a supplementary plan (collectively, the "Company Pension Plan"), will provide for fixed benefits upon retirement. The normal retirement age is 65, but early retirement is available after attainment of age 55 with at least 10 years of service at a reduced percentage of the normal retirement allowance (100% is payable if early retirement is at age 62). Directors who are not also employees of the Company are not eligible to participate in the Company Pension Plan. The Tax Qualified Pension Plan is a tax-qualified plan, and benefits are payable only with respect to non-deferred compensation. Under one of the supplementary plans mentioned above, the Company pays a supplemental pension, based on the formula described below, on deferred compensation (including deferred incentive compensation). Under the other supplementary plan, the Company will pay employees affected by the limitations imposed by the Code on qualified plans a supplemental pension in an annual amount equal to the reduction in pensions resulting from such limitations. "Compensation" for purposes of the Company Pension Plan represents average cash compensation per year (salary and bonus shown in the summary compensation table under "--Compensation of Executive Officers"), including deferred compensation, received for the highest three years during the ten years up to and including the year in which an employee retires, including compensation with Olin. The normal retirement allowance is 1.5% of "Compensation" as so defined multiplied by the number of years of benefit service, less an amount of the employee's primary Social Security benefit not to exceed 50% of such Social Security benefit. Years of benefit service shall also include benefit service with Olin. Under the Company's Senior Executive Pension Plan (the "Senior Plan"), which is a second nonqualified pension plan, the Company will pay retirement benefits to certain senior executives upon their retirement after age 55, which benefits are reduced if retirement is prior to age 62. Under the Senior Plan, the maximum benefit 49 will be 50% of "Compensation" (as defined above), less payments from the Company Pension Plan, any other Olin or Company pension, pension benefits from other employers, and certain Social Security benefits. Subject to the above limitations, benefits under the Senior Plan will accrue at the rate of 3% for each year of service that a senior executive is eligible to participate in the Senior Plan and in all cases are reduced by payments under the Pension Plan which accrued during the period the employee was in the Senior Plan and 50% of the employee's primary Social Security benefit. The Senior Plan will also provide benefits to the executive's surviving spouse equal to 50% of the executive's benefits. Payment of benefits under the Senior Plan is not automatic, notwithstanding satisfaction of its service requirements, but is subject to plan provisions regarding suspension of benefit accruals and cessation of benefits. The Senior Plan and the other two supplementary plans provide that unless the participant elects installment payments, the participant will receive benefits under these plans in a lump sum upon retirement if the lump sum would exceed $100,000. The Compensation Committee may remove a participant from the Senior Plan for cause as defined in such plan, and no payments will be made if the participant voluntarily terminates employment without the committee's consent. The Tax Qualified Pension Plan provides that if, within three years following a "Change in Control" of the Company, any corporate action is taken or filing made in contemplation of, among other things, a plan termination or merger or other transfer of assets or liabilities of the plan, and such termination, merger or other event thereafter takes place, plan benefits would automatically be increased for affected participants (and retired participants) to absorb any plan surplus. Each of the Senior Plan and the supplementary plan mentioned above provides that in the event of a "Change in Control", the Company will pay each participant a lump-sum amount sufficient to purchase an annuity which (together with any monthly payment provided under trust arrangements or other annuities established or purchased by the Company to make payments under such plan) will provide the participant with the same monthly after-tax benefit as the participant would have received under the plan, based on benefits accrued thereunder to the date of the "Change in Control." The agreements described under "Executive Agreements" below provide that an executive officer who is less than age 55 at the time of a "Change in Control" will, for purposes of calculating the above lump-sum payment under the Senior Plan, be treated as if he had retired at age 55, with the lump-sum payment being calculated on the basis of service to the date of the "Change in Control." The following table shows the maximum combined amounts payable annually on normal retirement under the Company Pension Plan and Senior Plan. Such amounts will be reduced by Social Security benefits and the other offsets described above. Pension Plan Table
Years of Service ---------------- Remuneration 10 Years 15 years 20 Years 25 Years 30 Years 35 Years 40 Years ------------ -------- -------- -------- -------- -------- -------- -------- $ 200,000 $ 60,000 $ 90,000 $100,000 $100,000 $100,000 $105,000 $120,000 300,000 90,000 135,000 150,000 150,000 150,000 157,500 180,000 400,000 120,000 180,000 200,000 200,000 200,000 210,000 240,000 500,000 150,000 225,000 250,000 250,000 250,000 262,500 300,000 600,000 180,000 270,000 300,000 300,000 300,000 315,000 360,000 700,000 210,000 315,000 350,000 350,000 350,000 367,500 420,000 800,000 240,000 360,000 400,000 400,000 400,000 420,000 480,000
Credited years of service for the Named Executive Officers as of December 31, 1998 are as follows: Mr. Campbell, 20.6 years (11.3 years under the Senior Plan); Mr. Anziano, 25.1 years (11.0 years under the Senior Plan), Ms. Kienzle, 1.4 years (1.4 years under the Senior Plan), Mr. Killian, 19.8 years (0 years under the Senior Plan), and Mr. Massimo, 4.1 years (1.1 years under the Senior Plan). The Company will be the "successor employer" under the union contracts covering employees at its unionized sites. These contracts require the Company essentially to replicate the benefits provided to covered 50 employees by Olin prior to the Distribution. The Tax Qualified Pension Plan will also provide for the benefits accrued under these union contracts for union employees who become employees of the Company at the time of the Distribution. Service credited under Olin's pension plan for these unionized employees will be recognized for the purpose of calculating benefits and for qualifying for vesting and early retirement benefits under the terms of the Tax Qualified Pension Plan. Following the Distribution, the Company will become liable for payment of benefits accrued for employees of the Company under any Olin non-qualified pension plans as of the Distribution. Such benefits will not be paid until the participant retires from the Company. Savings Plan As of the Distribution Date, Olin and the Company will take such steps as are necessary or desirable to convert the Olin Contributing Employee Ownership Plan (the "Olin CEOP") into a multiple employer plan in which both Olin and the Company participate. On and after the Distribution Date, employer contributions made on behalf of employees of the Company will be made by the Company. Employees of the Company who are not fully vested in the Olin CEOP at the time of the Distribution will become 100% vested in matching contributions following completion of five years of service (including prior service with Olin). The Olin CEOP will provide compensation deferral, or savings opportunities to employees of the Company following the Distribution. The Olin CEOP consists of a defined contribution plan available to substantially all domestic employees of the Company, pursuant to which employees may defer on a pre-tax or post-tax basis a portion of their compensation. Employees of the Company may elect to invest their contributions in Company Common Stock or in one or more of several investment funds. Employee contributions will be based on base pay. The Company will make a matching contribution equal to 100% of the first $25 of monthly contributions a Participant makes to the Olin CEOP plus 50% of the balance contributed by a participant (up to 6% of the participant's base pay) in Company Common Stock for the account of such participant. Participants will be eligible for a Performance Matching Contribution based on their eligible contributions to the Savings Plan based on a performance formula. Olin Common Stock held in the account of an employee of the Company under the Olin CEOP that is attributable to Olin contributions may only be retained in Olin Common Stock or reinvested in Company Common Stock. Dividends on Olin Common Stock held in the account of an employee of the Company under the Olin CEOP will be reinvested in Company Common Stock and after the Distribution Date, additional amounts may not be invested in Olin Common Stock. The Company will establish a non-qualified, unfunded Supplemental CEOP (the "Supplemental Plan") that is intended to restore the benefit under the Savings Plan that would otherwise be reduced as a consequence of certain compensation limits contained in the Code applicable to highly-compensated employees. Reserves held with respect to Olin's Supplemental CEOP for Company employees will be assumed by the Company and credited to the Supplemental Plan. In addition, employees who are covered by the Supplemental Plan may be able to defer before-tax contributions above the annual limitations imposed on qualified contribution plans such as the Olin CEOP. Arch Chemicals, Inc. 1999 Long Term Incentive Plan The Company has adopted the Arch Chemicals, Inc. 1999 Long Term Incentive Plan (the "Incentive Plan"), which is designed to help the Company attract and retain key employees by providing an incentive to increase their proprietary interest in the Company. Awards under the Incentive Plan may be in the form of stock options (including ISOs), restricted stock and restricted stock units and performance awards that the committee administering the Incentive Plan (also the "Committee", which shall be the same Committee that administers the 1999 Plan) approves provided that such awards are valued in whole or in part by reference to, or otherwise based on or related to, shares of Company Common Stock. 2,123,000 shares of Company Common Stock (subject to adjustment as provided below and for dividends, stock splits, mergers, spin-offs, split-ups, recapitalizations and the like) will be available for awards under the Incentive Plan. 51 Awards may be granted under the Incentive Plan to salaried employees, including officers, of the Company and any of its controlled subsidiaries. Awards may also be granted to salaried employees of any other entity in which the Company has a significant equity interest as determined by the Committee. Awards will be granted for no cash consideration or for such minimal cash consideration as may be required by applicable law. However, the exercise price per share of stock purchasable under any stock option and the purchase price of stock which may be purchased under any other award providing rights to purchase Company Common Stock will not be less than the fair market value of such stock on the date of grant of the option or other right. Administration of the Incentive Plan is the responsibility of the Committee, which shall be a committee of the Board consisting of at least two non- employee Directors. The Committee will have the authority to designate participants, determine the nature and size of, and terms and conditions applicable to, awards, permit deferral of award payments; permit the settlement or exercise of awards, and make all other determinations and interpretations relating to the Plan. Committee determinations and interpretations will be binding on all interested parties. Under the Incentive Plan, the Board may act at any time in lieu of the Committee. Stock Options. The term of options granted under the Incentive Plan will be fixed by the Committee; however, such term may not exceed ten years from the date of grant. The purchase price per share of stock purchasable under any option will be determined by the Committee but will not be less than the fair market value of the stock on the date of grant of the option. The Committee will determine the time or times at which an option may be exercised in whole or in part, subject to the provisions of the Incentive Plan relating to changes in control of the Company. Options may be exercised by payment in full of the purchase price, either in cash or, at the discretion of the Committee, in whole or in part in Company Common Stock or other consideration having a fair market value on the date the option is exercised equal to the option price. Restricted Stock. Restricted stock or restricted stock units may not be disposed of by the recipient until certain restrictions established by the Committee lapse. These restrictions will require recipients to remain in the employ of the Company (or an affiliate participating in the Incentive Plan) for at least three years (where vesting is based solely on continued service) in order to vest, except in the event of a Change in Control (as defined in the Incentive Plan) or for such specified reasons as the Committee may approve. Recipients will have with respect to restricted stock all of the rights of a shareholder of the Company, including the right to vote the shares and the right to receive any cash dividends unless the Committee otherwise determines. Upon termination of employment during the restriction period, the restricted stock and/or restricted stock units will be forfeited, subject to such exceptions, if any, as may be authorized by the Committee. Performance Awards. From time to time, the Committee may select a period during which performance criteria approved by the Committee will be measured for the purpose of determining the extent to which a performance award has been earned. Such period will not be less than one year, subject to the Change in Control provisions of the Incentive Plan. Performance awards may be denominated or payable in cash, shares of Common Stock, other securities, other awards or other property. Retiree Medical and Life Insurance Benefits Following the Distribution, Olin will remain liable for medical and death benefits provided to former employees of the Company who retire or have retired prior to the Distribution. The Company has adopted retiree medical and death benefit plans that largely replicate the Olin retiree benefit program, under which eligible employees of the Company will be covered (with appropriate credit for service with Olin) as of the Distribution Date. Other than possible increases in employee contributions, the Company has agreed that it will not reduce or terminate the retiree benefits provided by this program for a period of five years. The Company also has agreed to indemnify Olin from and against any claims brought against it by employees of the Company who retire after the Distribution Date. 52 Other Benefits Following the Distribution, the Company will be responsible for unpaid health care claims and unpaid short-term and long-term disability claims of employees of the Company, including disabled employees of Olin who were previously employed in the Specialty Chemical Businesses and were receiving short-term or long-term disability benefits at the time of the Distribution, whether such claims were incurred prior to, on or after the Distribution. The Company has adopted welfare plans (including plans providing life insurance, health care and disability benefits) covering employees of the Company following the Distribution which are expected to provide benefits substantially similar to those currently provided by Olin. The Company will adopt a plan that provides benefits substantially similar to the Flexible Spending Account Plan of Olin Corporation ("Olin's FSA") and shall assume all liabilities of Company employees under Olin's FSA. The Company will also adopt a deferral plan which will permit certain employees to defer compensation to cash accounts and/or Company stock accounts for payment at a later date. Existing accounts under the Olin Corporation Employee Deferral Plan (including Olin stock units) held for the benefit of individuals who will become Company employees will be transferred to the Company's deferral plan. Executive Agreements Each of the Named Executive Officers will have agreements with the Company which provide, among other things, that in the event of a covered termination of employment (which could include, among other things, termination of employment by the Company (other than for cause) and termination at the election of the individual to leave the Company under certain circumstances), the individual will receive a lump sum severance payment from the Company equal to 12 months' base pay plus the greater of (a) the average incentive compensation award paid from the Company during the three years preceding the termination or (b) the then standard annual incentive compensation award, less any amounts payable under existing severance or disability plans of the Company. In the event that a "Change in Control" of the Company occurs, and there is a covered termination, the individual will receive three times the severance payment. Pension credit and insurance coverage would be afforded for the period reflected in the severance payment, and in certain cases, insurance coverage will be extended beyond such period. The agreements also provide for certain outplacement services. A "Change in Control" would occur if the Company ceases to be publicly owned; 20% or more of its voting stock is acquired by others (other than the Company, a Subsidiary or a Company employee benefit plan); the incumbent Directors and their designated successors cease over a two-year period to constitute a majority of the Board; all or substantially all of the Company's business is disposed of in a transaction in which the Company is not the surviving corporation or the Company combines with another company and is the surviving corporation (unless the Company's shareholders following the transaction own more than 50% of the voting stock or other ownership interest of the surviving entity or combined company); or the shareholders of the Company approve a sale of all or substantially all the Company's assets or a liquidation or dissolution of the Company. Each agreement provides that the individual agrees to remain in the Company's employ for six months after a "Potential Change in Control" of the Company has occurred. The agreements provide that payments made thereunder or under any change in control provision of the Company's compensation or benefit plan which are subject to "excess parachute payment" tax will be increased so that the individual will receive a net payment equal to that which would have been received if such tax did not apply. Certain of the Company's benefit and compensation plans, including its annual incentive bonus plan, also contain "change-in-control" provisions. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION There are not expected to be any Compensation Committee interlocks. The members of the Company's Compensation Committee are expected to be Messrs. Cavanagh, Kuehler and Lichtenberger. 53 BENEFICIAL OWNERSHIP All of the outstanding shares of Company Common Stock are, and will be prior to the Distribution, held beneficially and of record by Olin. The following tables set forth information concerning shares of Company Common Stock projected to be beneficially owned after the Distribution Date by (i) each person or entity known by the Company to own more than five percent of the outstanding Company Common Stock, (ii) each person who will be a director of the Company at the time of the Distribution, (iii) each of the Named Executive Officers of the Company and (iv) all persons who will be directors and executive officers of the Company at the time of the Distribution as a group. The projections are based on the number of shares of Olin Common Stock owned by such person or entity at October 6, 1998, except with respect to Franklin Resources, Inc., September 30, 1998 and with respect to Scudder, Kemper Investments, Inc., FMR Corp., and T. Rowe Price Associates, Inc., December 31, 1997. The figures reflect the Distribution Ratio of one share of Company Common Stock for every two shares of Olin Common Stock. The percentage ownership of Company Common Stock of each person or entity named below immediately following the Distribution will be the same as the percentage ownership of such person or entity immediately prior to the Distribution and is calculated based on the number of shares of Olin Common Stock outstanding as of September 30, 1998. Unless otherwise indicated in the footnotes below, each person or entity has sole voting and investment power with respect to the shares of Company Common Stock set forth opposite such person's or entity's name. Also included in the figures are shares of Company Common Stock which may be acquired within 60 days through the exercise of employee stock options, if any. By Directors and Executive Officers
No. of Shares Beneficially Percent of Name of Beneficial Owner Owned(a,b) Class(c) - ------------------------ ------------ ---------- Richard E. Cavanagh 2,425 -- John W. Johnstone, Jr. 179,124 -- Jack D. Kuehler 6,245 -- H. William Lichtenberger 4,863 -- John P. Schaefer 7,158 -- Michael E. Campbell 59,046 -- Leon B. Anziano 31,798 -- Sarah Y. Kienzle 2,255 -- Mark A. Killian 9,075 -- Louis S. Massimo 6,172 -- Directors and executive officers as a group, including those named above (11 persons) 309,311 1.3
(a) Included in this table with respect to officers are shares credited under the Olin CEOP. Also included in the case of the incumbent directors are certain shares of Company Common Stock credited to a deferred account for such directors pursuant to the arrangements described above under "Compensation of Directors" in the amounts of 2,302 for Mr. Cavanagh; 846 for Mr. Johnstone; 6,245 for Mr. Kuehler; 4,663 for Mr. Lichtenberger; and 4,478 for Mr. Schaefer. Such shares so credited to these directors have no voting power. (b) The amounts shown include shares that may be acquired within 60 days following October 6, 1998 through the exercise of stock options, as follows: Mr. Johnstone, 119,302; Mr. Campbell, 46,367; Mr. Anziano, 22,321; Ms. Kienzle, 1,667; Mr. Killian, 6,609; Mr. Massimo, 5,738; and all directors and executive officers as a group, including the named individuals, 202,006. (c) Unless otherwise indicated, beneficial ownership of any named individual does not exceed 1% of the outstanding shares of Company Common Stock. 54 By Others
Amount and Nature of Percent Name and Address of Beneficial Beneficial of Owner Ownership Class - ------------------------------ ----------- ------- Franklin Resources, Inc. 2,676,755(a) 11.0 777 Mariners Island Boulevard San Mateo, CA 94403 Scudder, Kemper Investments, Inc. 2,166,956(b) 9.2 345 Park Avenue New York, NY 10154 FMR Corp. 2,018,575(c) 8.5 82 Devonshire Street Boston, MA 02109 T. Rowe Price Associates, Inc. 1,433,500(d) 6.1 100 East Pratt Street Baltimore, MD 21202
- -------- (a) Charles B. Johnson, Rupert H. Johnson, Jr., Franklin Mutual Advisers, Inc. and Franklin Resources, Inc. ("FRI") have advised Olin in an amended Schedule 13G and Form 4 filings that the shares are owned by one or more open or closed-end investment companies or other managed accounts which are advised by direct or indirect investment subsidiaries ("Adviser Subsidiaries") of FRI and such advisory contracts grant to such Adviser Subsidiaries all voting and investment power over such shares. It also reports that Franklin Mutual Advisers, Inc. has sole power to vote and sole depositive power with respect to such shares. (b) Scudder, Kemper Investments, Inc., a registered investment adviser ("Scudder"), has advised Olin in an amended Schedule 13G filing that it has sole dispositive power with respect to the shares, has sole power to vote with respect to 498,000 shares, and shared power to vote with respect to 1,525,800 shares. Scudder disclaims beneficial ownership of all the shares. (c) Olin has been advised in an amended Schedule 13G filing as follows with respect to these shares: Fidelity Management & Research Company ("Fidelity") and Fidelity Management Trust Company ("FMTC") beneficially own 1,701,225 and 230,700 shares, respectively. Both are subsidiaries of FMR Corp. ("FMR"). Edward C. Johnson 3rd ("Johnson"), who is the Chairman of FMR, FMR, through its control of Fidelity, and its Funds each has sole dispositive power with respect to the 1,701,225 shares owned by the Funds. Neither Johnson nor FMR has sole voting power with respect to the shares owned by the Funds, which power rests with the Funds' Board of Trustees. Johnson and FMR, through its control of FMTC, each has sole dispositive power over 230,700 shares, sole voting power over 173,450 shares and no voting power with respect to 57,250 of the shares. Additionally, Fidelity International Limited beneficially owns 86,650 shares, as to which it has sole voting power and sole dispositive power. (d) T. Rowe Price Associates, Inc., a registered investment adviser, has advised Olin in a Schedule 13G filing that it has sole dispositive power with respect to the shares and sole power with respect to 250,400 shares. T. Rowe Price Associates, Inc. expressly disclaims that it is, in fact, the beneficial owner of such securities. 55 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In connection with the Distribution, the Company will assume $75 million of indebtedness expected to be incurred by Olin pursuant to the Five-year Facility. In addition, there will be certain ongoing relationships between Olin and the Company. See "Relationship Between Olin and the Company After the Distribution." DESCRIPTION OF CAPITAL STOCK Authorized Capital Stock Under the Company's Articles, the Company has authority to issue ten million shares of preferred stock, par value $1.00 per share ("Preferred Stock"), and 100 million shares of Company Common Stock, par value $1.00 per share. As of the date hereof, 100 shares of Company Common Stock were issued and outstanding. Based on the number of shares of Olin Common Stock outstanding at December 31, 1998, and the Distribution Ratio of one share of Company Common Stock for every two shares of Olin Common Stock, it is expected that approximately 22,961,432 shares will be issued to shareholders of Olin in the Distribution. The Company Common Stock to be distributed will constitute all of the outstanding Company Common Stock immediately after the Distribution. All of the shares of Company Common Stock to be distributed to Olin shareholders in the Distribution will be fully paid and non-assessable. The following statements with respect to the capital stock of the Company are subject to the detailed provisions of the Company's Articles and By-laws as in effect at the time of the Distribution. These statements do not purport to be complete, or to give full effect to the provisions of statutory or common law, and are subject to, and are qualified in their entirety by reference to, the terms of the Articles, the By-laws and the Rights Agreement (as defined below). Common Stock Holders of Company Common Stock are entitled to dividends as declared by the Board from time to time after payment of, or provision for, full cumulative dividends on and any required redemptions of shares of Preferred Stock then outstanding. Holders of Company Common Stock are entitled to one vote per share on all matters submitted to a vote of such holders and may not cumulate votes for the election of directors. Holders of Company Common Stock have no preemptive or subscription rights and have no liability for further calls or assessments. In the event of the liquidation, dissolution or winding up of the Company, holders of Company Common Stock are entitled to receive pro rata all the remaining assets of the Company available for distribution, after satisfaction of the prior preferential rights of the Preferred Stock and the satisfaction of or provision for all debts and liabilities of the Company. The Transfer Agent and Registrar for the Company Common Stock is ChaseMellon Shareholder Services, L.L.C. Preferred Stock The Articles authorize the Board, without any vote or action by the holders of Company Common Stock, to issue up to 10 million shares of Preferred Stock from time to time in one or more series. The Board is authorized to determine the number of shares and designation of any series of Preferred Stock and the dividend rights, dividend rate, conversion rights and term, voting rights (full or limited, if any), redemption rights and terms, liquidation preferences and sinking fund and other terms of any series of Preferred Stock. Issuances of Preferred Stock would be subject to the applicable rules of the NYSE or other organizations on whose systems the stock of the Company may then be quoted or listed. Depending upon the terms of the Preferred Stock established by the Board, any or all series of Preferred Stock could have preference over the Company Common Stock with respect to dividends and other distributions and upon liquidation of the Company. Issuance of any such shares with voting powers, or issuance of additional shares of Company Common Stock, would dilute the voting power 56 of the outstanding Company Common Stock. The Company has no present plans to issue any Preferred Stock, except that the Rights Agreement provides for the issuance of shares of Preferred Stock, under the circumstances specified in the Rights Agreement, upon the exercise or exchange of Rights (as defined below) issued thereunder. See "Rights Agreement." Authorized But Unissued Capital Stock Virginia law does not require shareholder approval for any issuance of authorized shares other than in connection with certain mergers to which the Company may be a party. However, the NYSE rules, which would apply so long as Company Common Stock remains listed thereon, require shareholder approval of certain issuances of common stock or securities convertible into or exchangeable for common stock equal to or exceeding 20% of the then outstanding voting power or then outstanding number of shares of Company Common Stock. These additional shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital or to facilitate corporate acquisitions. Rights The Company is expected to declare a dividend of one right (a "Right") for each outstanding share of Company Common Stock to the shareholders of record on February 5, 1999. Rights also will be issued with respect to Company Common Stock issued thereafter, prior to the occurrence of certain change-in-control events. The Rights become exercisable upon certain potential change-in-control events. When exercisable and upon the occurrence of certain events, the Rights entitle holders (other than an Acquiring Person (as defined below)) to purchase shares of Preferred Stock, other securities of the Company or shares of the Acquiring Person's common stock (or stock of one of its affiliates or associates) at a substantial discount. Exercise of the Rights will cause substantial dilution to a person or group attempting to acquire control of the Company without the approval of the Board. Except under certain circumstances, the Board may cause the Company to redeem the Rights in whole, but not in part, at a price of $0.01 per Right. The Rights will not interfere with any merger or other business combination approved by the Board. The Rights expire on January 29, 2009, if not redeemed earlier. The Rights have no voting or dividend privileges. Until such time as the Rights become exercisable, they are attached to, evidenced by and will not trade separately from the Company Common Stock. For a more complete description of the Rights, see "Rights Agreement." No Preemptive Rights No holder of any class of stock of the Company authorized at the time of the Distribution will have any preemptive right to subscribe to any securities of the Company of any kind or class. Certain Provisions of the Articles, By-laws and Virginia Corporate Law The Board's membership is divided into three classes as nearly equal in number as possible, each of which serves for three years with one class being elected each year. The maximum number of Directors is fixed in the Articles at ten. The affirmative vote of 80% of the voting power of the outstanding voting shares, voting as a single voting group, is required to amend the provisions of the Articles relating to the parameters of the Board. Special meetings of shareholders may be called only by the Board or certain designated officers. Directors may be removed only with cause and by the affirmative vote of 80% of the voting power of the outstanding voting shares, voting as a single voting group, and vacancies on the Board, including any vacancy created by an increase in the number of Directors, may be filled only by the Board unless the vacancy is required to be filled at an annual meeting of shareholders. The By-laws require that advance notice of nominees for election as Directors to be made by a shareholder and proposals to be submitted by a shareholder be given to the Secretary of the Company, together with certain specified information, no more than 120 days and no later than 90 days before the anniversary date of the first mailing of the Company's proxy statement for the immediately preceding year's annual meeting. The Board has the power to amend the By-laws, but shareholders may not amend any provision of the By-laws without the affirmative vote of 80% of the voting power of the outstanding voting shares, voting as a single voting group. The provisions of the Articles and By-laws described above may, in certain circumstances, make more difficult or discourage a takeover of the Company. 57 In addition, the Virginia Stock Corporation Act contains certain anti- takeover provisions regarding affiliated transactions, control share acquisitions and the adoption of shareholder rights plans. In general, the affiliated transactions provisions of the Virginia Stock Corporation Act prevent a Virginia corporation from engaging in an "affiliated transaction" (as defined) with an "interested shareholder" (generally defined as a person owning more than 10% of any class of voting securities of the corporation) for three years unless approved by a majority of the "disinterested directors" (as defined) and the holders of at least two-thirds of the outstanding voting stock not owned by the interested shareholder, subject to certain exceptions. Thereafter, the corporation may engage in such affiliated transaction only if approved by at least two-thirds of the outstanding voting stock not owned by the interested shareholder or if approved by a majority of the disinterested directors or if certain fair price and procedure provisions are complied with. The Virginia Stock Corporation Act also contains certain shareholder rights plan provisions that permit the Board to adopt a shareholder rights plan (such as the Rights Agreement) that could render a hostile takeover prohibitively expensive if the Board determines that such a takeover is not in the best interests of the Company. The existence of the shareholder rights plan provisions of the Virginia Stock Corporation Act, as well as the affiliated transactions provisions, could delay or prevent a change in control of the Company, impede a merger, consolidation or other business combination involving the Company or discourage a potential acquiror from making a tender offer or otherwise attempting to obtain control of the Company. The Company has elected to "opt out" of the control share acquisition provisions under Article 14.1 of the Virginia Stock Corporation Act, which prohibits significant shareholders who acquire specific amounts of Company Common Stock from voting certain shares of Company Common Stock so acquired without obtaining the affirmative vote of a majority of the shares of Company Common Stock held by persons other than such a shareholder or officers and certain directors of the Company. As a result of this election, a purchaser of Company Common Stock in a "control share acquisition" will not have the right to cause a special meeting of shareholders to be convened for the purpose of considering whether to grant voting rights otherwise prohibited by the Virginia Stock Corporation Act to such an acquiring shareholder. RIGHTS AGREEMENT The Company is expected to declare a dividend of one Right for each outstanding share of Company Common Stock to the holders of record at the close of business on February 5, 1999, and has approved the issuance of additional Rights with respect to Company Common Stock issued thereafter and before the occurrence of certain change-of-control events. Each Right, when it becomes exercisable as described below, will entitle the registered holder to purchase from the Company one-thousandth ( 1/1000) of a share of Series A Participating Cumulative Preferred Stock, par value $1 per share, of the Company ("Preferred Shares") or, under certain circumstances, Company Common Stock or other securities of the Company at a price of $125 (the "Purchase Price"). The description and terms of the Rights are set forth in a Rights Agreement dated as of January 29, 1999 (the "Rights Agreement"), between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent. Until the earlier of (a) such time as the Company learns that a person or group (including any affiliate or associate of such person or group) has acquired, or has obtained the right to acquire, beneficial ownership of 15% or more of the outstanding Company Common Stock (an "Acquiring Person"), unless provisions preventing accidental triggering of the Rights apply, and (b) the close of business on such date, if any, as may be designated by the Board following the commencement of, or first public disclosure of an intent to commence, a tender or exchange offer by any person (other than the Company, its subsidiaries or benefit plans) for 15% of the outstanding Company Common Stock, if upon consummation of such tender or exchange offer such person could be the beneficial owner of more than 15% of the outstanding Company Common Stock, the Rights will be evidenced by ownership of the Company Common Stock and will be transferred only with the Company Common Stock. The Rights will expire on January 29, 2009 (the "Expiration Date"), unless earlier redeemed by the Company as described below. 58 Upon a person becoming an Acquiring Person, the Rights Agreement provides that proper provision will be made so that each Right (other than Rights that are beneficially owned by an Acquiring Person or an affiliate or associate of an Acquiring Person) will entitle its holder to purchase, for the Purchase Price, a number of Preferred Shares having a market value at the time of the transaction equal to two times the Purchase Price. The number of Preferred Shares or other securities issuable upon exercise of the Rights is subject to adjustment from time to time in the event of any change in the Company Common Stock or the Preferred Shares. In the event the Company is acquired in a merger or other business combination by an Acquiring Person or an associate or affiliate of an Acquiring Person that is a publicly traded corporation or 50% or more of the Company's assets or assets representing 50% or more of the Company's revenues or cash flow are sold, leased, exchanged or otherwise transferred (in one or more transactions) to an Acquiring Person or an associate or affiliate of an Acquiring Person that is a publicly traded corporation, each Right (other than Rights that are beneficially owned by an Acquiring Person or any affiliate or associate of an Acquiring Person) will entitle its holder to purchase, for the Purchase Price, that number of common shares of such corporation which at the time of the transaction would have a market value of twice the Purchase Price. In the event the Company is acquired in a merger or other business combination by an Acquiring Person or an associate or affiliate of an Acquiring Person that is not a publicly traded entity or 50% or more of the Company's assets or assets representing 50% or more of the Company's revenues or cash flow are sold, leased, exchanged or otherwise transferred (in one or more transactions) to an Acquiring Person or an associate or affiliate of an Acquiring Person that is not a publicly traded entity, each Right (other than Rights that are beneficially owned by an Acquiring Person or any affiliate or associate of an Acquiring Person) will entitle its holder to purchase, for the Purchase Price, at such holder's option, (a) that number of shares of the surviving corporation in the transaction with such entity (which surviving corporation could be the Company) which at the time of the transaction would have a book value of twice the Purchase Price, (b) that number of shares of such entity which at the time of the transaction would have a book value of twice the Purchase Price or (c) if such entity has an affiliate which has publicly traded common shares, that number of common shares of such affiliate which at the time of the transaction would have a market value of twice the Purchase Price. At any time prior to the earlier of (a) such time as a person or group becomes an Acquiring Person and (b) the Expiration Date, the Board may redeem the Rights in whole, but not in part, at a price of $0.01 per Rights (subject to adjustment as provided in the Rights Agreement). Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends. LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS The Virginia Stock Corporation Act permits, and the Company's Articles require, indemnification of the Company's directors, officers, and employees in a variety of circumstances. Under Section 13.1-697 and 13.1-704 of the Virginia Stock Corporation Act, a Virginia corporation generally is authorized to indemnify its directors, officers, and employees in civil or criminal actions if such persons acted in good faith and believed their conduct to be in the best interests of the corporation and, in the case of criminal actions, had no reasonable cause to believe that their conduct was unlawful. The Company's Articles require indemnification of directors, officers and employees with respect to certain liabilities, expenses, and other amounts imposed upon such persons by reason of having been directors, officers or employees unless such persons engaged in willful misconduct or knowing violation of the criminal law. Also, Section 13.1-692.1 of the Virginia Stock Corporation Act permits a Virginia corporation to limit or totally eliminate the liability of a director or officer in a shareholder or derivative proceeding under certain circumstances and the Company's Articles contain a provision intended to eliminate such liability. Directors and officers of the Company are insured, subject to policy limits and certain exclusions and limitations and to the extent not otherwise indemnified by the Company, against loss (including expenses 59 incurred in the defense of actions, suits and proceedings in connection therewith) arising from any error, misstatement, misleading statement, omission or other act made or performed in their capacity as directors and officers. The policies also reimburse the Company for liability incurred in the indemnification of its directors and officers under common or statutory laws or the Company's Articles, subject to the terms, conditions and exclusions of the policy. In addition, directors and officers and other employees of the Company who may be "fiduciaries" as that term is used in the Employee Retirement Income Security Act of 1974, are insured with respect to liabilities under such Act. AVAILABLE INFORMATION The Company has filed with the Commission the Registration Statement under the Exchange Act with respect to the Shares being issued in the Distribution. This Information Statement does not contain all of the information set forth in the Registration Statement and the exhibits thereto, to which reference is hereby made. Statements made in this Information Statement as to the contents of any contract, agreement or other document referred to herein are summaries only and are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to such exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference. The Registration Statement and the exhibits thereto filed by the Company with the Commission may be inspected at the public reference facilities of the Commission listed below. After the Distribution, the Company will be subject to the informational requirements of the Exchange Act, and in accordance therewith will file reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at its principal offices at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional Offices of the Commission at Seven World Trade Center, Suite 1300, New York, New York 10048 and in the Citicorp Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. Copies of such information may be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission also maintains a World Wide Web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. In addition, it is expected that reports, proxy statements and other information concerning the Company will be available for inspection at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. The Company intends to furnish holders of the Company's shares with annual reports containing consolidated financial statements (beginning with the year ending December 31, 1998) audited by independent accountants. ---------------- NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS INFORMATION STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS INFORMATION STATEMENT NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. 60 INDEX TO COMBINED FINANCIAL STATEMENTS
Page ---- Independent Auditors' Report............................................. F-2 Combined Balance Sheets as of September 30, 1998 (unaudited) and as of December 31, 1997 and 1996.............................................. F-3 Combined Statements of Income for the Nine Months Ended September 30, 1998 and 1997 (unaudited) and for the Years Ended December 31, 1997, 1996, and 1995.......................................................... F-4 Combined Statements of Cash Flow for the Nine Months Ended September 30, 1998 and 1997 (unaudited) and for the Years Ended December 31, 1997, 1996, and 1995.......................................................... F-5 Combined Statements of Equity and Comprehensive Income for the Nine Months Ended September 30, 1998 and 1997 (unaudited) and for the Years Ended December 31, 1997, 1996 and 1995.................................. F-6 Notes to Combined Financial Statements................................... F-7
F-1 INDEPENDENT AUDITORS' REPORT The Board of Directors of Olin Corporation: We have audited the accompanying combined balance sheets of Arch Chemicals, Inc. as of December 31, 1997 and 1996, and the related combined statements of income, equity and comprehensive income and cash flows for each of the years in the three-year period ended December 31, 1997. These combined financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Arch Chemicals, Inc. as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Stamford, Connecticut November 2, 1998 F-2 ARCH CHEMICALS, INC. COMBINED BALANCE SHEETS
Unaudited December 31, September 30, -------------- 1998 1997 1996 ------------- ------ ------ ($ in millions) ASSETS ------ Current Assets: Cash $ 5.5 $ 9.0 $ 5.5 Receivables, net: Trade 141.1 142.2 128.1 Other 19.7 19.4 23.6 Inventories, net 121.1 139.1 129.6 Other Current Assets 23.5 24.4 24.1 ------ ------ ------ Total Current Assets 310.9 334.1 310.9 Investments & Advances--Affiliated Companies at Equity 19.9 21.1 20.3 Property, Plant and Equipment, net 305.1 280.4 257.3 Goodwill 35.4 35.2 37.1 Other Assets 19.9 22.4 25.6 ------ ------ ------ Total Assets $691.2 $693.2 $651.2 ====== ====== ====== LIABILITIES AND EQUITY ---------------------- Current Liabilities: Short-Term Borrowings $ 0.3 $ 1.4 $ 1.8 Accounts Payable 101.9 118.2 130.5 Accrued Liabilities 65.3 63.0 53.7 ------ ------ ------ Total Current Liabilities 167.5 182.6 186.0 Long-Term Debt 5.5 5.5 5.5 Other Liabilities 44.7 49.5 30.1 ------ ------ ------ Total Liabilities 217.7 237.6 221.6 Commitments & Contingencies Cumulative Translation Adjustment (14.1) (16.2) (7.3) Equity 487.6 471.8 436.9 ------ ------ ------ Total Liabilities and Equity $691.2 $693.2 $651.2 ====== ====== ======
See accompanying notes to the combined financial statements F-3 ARCH CHEMICALS, INC. COMBINED STATEMENTS OF INCOME
Unaudited Nine Months Ended Years Ended December September 30, 31, ----------------- -------------------- 1998 1997 1997 1996 1995 -------- -------- ------ ------ ------ ($ in millions) Sales $ 694.4 $ 728.1 $929.9 $913.5 $872.8 Operating Expenses: Cost of Goods Sold 493.7 525.8 676.3 647.8 659.6 Selling and Administration 127.9 118.3 153.5 159.0 141.1 Research and Development 13.1 15.5 21.1 21.0 17.4 -------- -------- ------ ------ ------ Operating Income 59.7 68.5 79.0 85.7 54.7 Interest Income, net 0.3 0.2 0.1 0.8 -- Other Income 2.8 5.0 7.1 7.6 12.6 -------- -------- ------ ------ ------ Income Before Taxes 62.8 73.7 86.2 94.1 67.3 Income Taxes 21.4 25.6 29.9 33.0 23.4 -------- -------- ------ ------ ------ Net Income $ 41.4 $ 48.1 $ 56.3 $ 61.1 $ 43.9 ======== ======== ====== ====== ======
See accompanying notes to the combined financial statements F-4 ARCH CHEMICALS, INC. COMBINED STATEMENTS OF CASH FLOWS
Unaudited Nine Months Ended Years Ended December September 30, 31, -------------- ---------------------- 1998 1997 1997 1996 1995 ------ ------ ------ ------ ------ ($ in millions) Operating Activities Net Income $ 41.4 $ 48.1 $ 56.3 $ 61.1 $ 43.9 Adjustments to Reconcile Net Income to Net Cash and Cash Equivalents Provided (Used) by Operating Activities: Earnings of Non-consolidated Affiliates (2.8) (5.0) (7.1) (7.6) (5.6) Depreciation 31.4 32.4 43.6 40.2 41.4 Amortization of Intangibles 2.9 2.8 3.8 4.0 2.2 Deferred Taxes 5.5 (3.9) (5.2) 4.3 (7.6) Gain on Disposition of Business -- -- -- -- (7.0) Change in Assets and Liabilities Net of Purchases and Sales of Businesses: Receivables (0.6) (33.5) (13.7) (6.5) 8.6 Inventories 17.6 (0.9) (14.9) (27.8) (0.6) Other Current Assets 0.9 2.0 0.7 3.4 (2.6) Accounts Payable & Accrued Liabilities (14.8) (16.1) (8.4) 35.1 (4.2) Noncurrent Liabilities (6.1) (1.3) 17.4 (14.1) 1.4 Other Operating Activities 0.3 6.2 11.0 (6.0) (2.4) ------ ------ ------ ------ ------ Net Operating Activities 75.7 30.8 83.5 86.1 67.5 ------ ------ ------ ------ ------ Investing Activities Capital Expenditures (52.2) (43.0) (71.0) (53.2) (65.4) Business Acquired in Purchase Transactions -- -- -- -- (64.6) Proceeds from Sales of Businesses -- -- 12.0 5.5 48.7 Investments and Advances--Affiliated Companies at Equity -- -- (0.2) 1.2 1.3 Other Investing Activities (2.5) (0.1) (0.2) (2.9) (0.8) ------ ------ ------ ------ ------ Net Investing Activities (54.7) (43.1) (59.4) (49.4) (80.8) ------ ------ ------ ------ ------ Financing Activities Short-Term Debt Borrowings (Repayments) (1.0) (1.2) (0.2) 1.7 (22.5) Net Intercompany Activity (25.6) 6.4 (21.4) (38.7) 38.9 ------ ------ ------ ------ ------ Net Financing Activities (26.6) 5.2 (21.6) (37.0) 16.4 ------ ------ ------ ------ ------ Effect of Exchange Rate Changes on Cash and Cash Equivalents 2.1 5.4 1.0 -- (2.6) ------ ------ ------ ------ ------ Net Increase (Decrease) in Cash and Cash Equivalents (3.5) (1.7) 3.5 (0.3) 0.5 Cash and Cash Equivalents, Beginning of Period 9.0 5.5 5.5 5.8 5.3 ------ ------ ------ ------ ------ Cash and Cash Equivalents, End of Period $ 5.5 $ 3.8 $ 9.0 $ 5.5 $ 5.8 ====== ====== ====== ====== ======
See accompanying notes to the combined financial statements F-5 ARCH CHEMICALS, INC. COMBINED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME
Cumulative Translation Comprehensive Equity Adjustment Income ------ ----------- ------------- ($ in millions) Years Ended December 31, Balance at January 1, 1995 $331.7 $ (2.5) Net Income 43.9 $43.9 Translation Adjustment (0.6) (0.6) Net Intercompany Activity 38.9 ----- Comprehensive Income $43.3 ------ ------ ===== Balance at December 31, 1995 414.5 (3.1) Net Income 61.1 $61.1 Translation Adjustment (4.2) (4.2) Net Intercompany Activity (38.7) ----- Comprehensive Income $56.9 ------ ------ ===== Balance at December 31, 1996 436.9 (7.3) Net Income 56.3 $56.3 Translation Adjustment (8.9) (8.9) Net Intercompany Activity (21.4) ----- Comprehensive Income $47.4 ------ ------ ===== Balance at December 31, 1997 $471.8 $(16.2) ====== ====== Nine Months Ended September 30, (Unaudited) Balance at January 1, 1997 $436.9 $ (7.3) Net Income 48.1 $48.1 Translation Adjustment (6.5) (6.5) Net Intercompany Activity 6.4 ----- Comprehensive Income $41.6 ------ ------ ===== Balance at September 30, 1997 $491.4 $(13.8) ====== ====== Balance at January 1, 1998 $471.8 $(16.2) Net Income 41.4 $41.4 Translation Adjustment 2.1 2.1 Net Intercompany Activity (25.6) ----- Comprehensive Income $43.5 ------ ------ ===== Balance at September 30, 1998 $487.6 $(14.1) ====== ======
See accompanying notes to the combined financial statements F-6 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS ($ in millions) Olin Corporation's Proposed Distribution of Arch Chemicals, Inc. On July 29, 1998 the Board of Directors of Olin Corporation ("Olin") approved in principle a plan to distribute all of the outstanding shares of Arch Chemicals, Inc. (the "Company") to shareholders on a date to be determined (the "Distribution"). The Company will own the assets and assume the liabilities of Olin's Specialty Chemicals businesses. The anticipated Distribution will result in the Company operating as a free standing corporation whose common shares will be publicly traded. Olin expects the Distribution to be completed by the end of the first quarter of 1999, after the appropriate approvals of third parties and the receipt of an opinion of its counsel that the receipt of the Company shares by Olin shareholders will be tax-free and that no gain or loss with respect to the Company shares will be recognized by Olin on the Distribution. Prior to the Distribution, it is anticipated that the Company will succeed to a credit facility established by Olin which is intended to provide sufficient liquidity for the Company's current funding needs. The Company expects that the credit facility will have a five-year term. Olin and the Company will enter into a Tax Sharing Agreement providing that Olin will be responsible for the Federal tax liability of the Company for each year that the Company and its subsidiaries were included in Olin's consolidated Federal income tax return, and for state, local and foreign taxes of the Company and its subsidiaries attributable to periods prior to the Distribution, in each case including tax subsequently assessed pursuant to the audit of, or other adjustment to, previously filed tax returns. Olin and the Company will enter into a Chlor-Alkali Supply Agreement providing for the supply by Olin of chlorine and caustic soda subsequent to the Distribution. Olin and the Company will also enter into a Charleston Service Agreement pursuant to which the Company and Olin will provide each other with various services at the Charleston, Tennessee plant site. The terms of these agreements are consistent with the amounts included in the historical financial statements. Accounting Policies The preparation of the combined financial statements requires estimates and assumptions that affect amounts reported and disclosed in the financial statements and related notes. Actual results could differ from those estimates. Basis of Presentation The Company is a business unit of Olin consisting of the Specialty Chemicals Division. The Company has organized its segments around differences in products and services, which is how the Company manages its business. The microelectronic chemicals segment supplies a range of products and services to semiconductor manufacturers and flat panel display manufacturers. These include a variety of high purity acids, bases, oxidizers, etchants, solvents, photoresists, polyimides and ancillary products. The water chemicals segment manufactures and sells chemicals and distributes equipment for the santization and recreational use of residential and commercial pool water and the purification of potable water. The performance chemicals segment manufactures and sells a broad range of products with diverse end uses. Performance chemicals are characterized by technology driven product solutions that benefit specific customers and provide manufacturing flexibility. The products include flexible and specialty polyols, glycols and glycol ethers, pyrithione-based and IPBC-based biocides, hydrazine hydrates and propellants and virgin and regenerated sulfuric acid. F-7 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ($ in millions) The accompanying combined financial statements, which have been prepared as if the Company had operated as a separate stand-alone entity for all periods presented except as discussed in the following paragraph and, include only those assets, liabilities, revenues and expenses attributable to the Company's operations. The combined financial statements include the accounts of the Company and certain majority-owned subsidiaries of Olin which will become subsidiaries of the Company prior to the Distribution. Intercompany balances and transactions between entities included in these financial statements have been eliminated. Investments in 20-50% owned affiliates of Olin which will become investments of the Company prior to the Distribution are accounted for on the equity method. Accordingly, the Company's share of earnings or losses of these affiliates is included in other income in the combined statements of income. See Exhibit 21 to the Form 10 for a listing of the subsidiaries and affiliates of the Company. The combined financial statements do not include an allocation of Olin's consolidated debt and interest expense. An assessment of corporate overhead is included in selling and administration expenses with the allocation based on either effort committed or number of employees. Management believes that the allocation methods used to allocate the costs and expenses are reasonable, however, such allocated amounts may or may not necessarily be indicative of what selling and administration expenses would have been if the Company operated independently of Olin. It is anticipated that when the Company becomes a separate public company administration expenses will increase by approximately $4.0 (unaudited) per year as a result of additional financial reporting requirements, stock transfer fees, directors' fees, insurance and executive compensation and benefits. Foreign Currency Translation Foreign affiliate balance sheet amounts are translated at the exchange rates in effect at year-end, and income statement and cash flow amounts are translated at the average rates of exchange prevailing during the year. Translation adjustments are recorded as a component of equity. Where foreign affiliates operate in highly inflationary economies non-monetary amounts are translated at historical exchange rates while monetary assets and liabilities are translated at the current rate with the related adjustments reflected in the combined statements of income. Cash and Cash Equivalents All highly liquid investments with a maturity of three months or less at the date of purchase are considered to be cash equivalents. U.S. Government Contracts The Company has entered into a contract with the United States Department of the Air Force to supply hydrazine based propellant. It is a one year contract with four one year renewal options beginning January 1, 1995 and expiring on December 31, 1999. The contract consists of a fixed priced facility usage fee and a product purchase arrangement whereby the Company supplies product at a fixed price per pound of product purchased adjusted annually for agreed upon cost escalations. In 1997, 1996 and 1995 the Company's sales include $20.2, $19.3, and $18.6 related to these agreements. Inventories Inventories are stated at the lower of cost or net realizable value. Certain inventories are included in a larger pool of Olin inventories valued by the dollar value last-in, first-out (LIFO) method of inventory accounting. The F-8 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ($ in millions) allocation of LIFO reserves is determined by the Company's percentage share of the related inventory pool (based on first-in, first-out). Costs for other inventories have been determined principally by the first-in, first-out (FIFO) method. Elements of costs in inventories include raw materials, direct labor and manufacturing overhead. 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 Building 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. Comprehensive Income As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income," which established standards for the reporting and display of comprehensive income and its components in the financial statements. The Company does not provide for U.S. income taxes on foreign currency translation adjustments since it does not provide for such taxes on undistributed earnings of foreign subsidiaries. Goodwill Goodwill, the excess of the purchase price of the acquired businesses over the fair value of the respective net assets, is amortized principally over 30 years on a straight-line basis. Accumulated amortization was $20.9, $19.4 and $17.3 at September 30, 1998, December 31, 1997 and 1996, respectively. The Company periodically reviews the value of its goodwill to determine if any impairment has occurred. The Company assesses the potential impairment of recorded goodwill and other long-lived assets by comparing the undiscounted value of the related expected future operating cash flows to the net book value of the goodwill. An impairment would be recorded based on the estimated fair value. Other intangibles, which consist primarily of patents, trademarks, and various technology licensing agreements, are amortized on a straight-line basis principally over 3 to 15 years. Environmental Liabilities and Expenditures Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based upon current law and existing technologies. These amounts, which are not discounted and are exclusive of claims against third parties, are adjusted periodically as assessment and remediation efforts progress or additional technical or legal information becomes available. Environmental remediation costs are charged to expense. Environmental costs are capitalized if the costs increase the value of the property and /or mitigate or prevent contamination from future operations. Income Taxes Prior to the Distribution, the Company's operations are included in the U.S. federal consolidated tax returns of Olin. The provision for income taxes includes the Company's allocated share of Olin's consolidated income tax provision and is calculated on a separate company basis pursuant to the requirements of Statement of F-9 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ($ in millions) Financial Accounting Standards No. 109, "Accounting for Income Taxes." Allocated income taxes payable are reflected herein as being settled with Olin on a current basis. Deferred taxes are provided for differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Derivative Financial Instruments The Company enters into forward sales and purchase contracts and currency options to manage currency risk resulting from purchase and sale commitments denominated in foreign currencies (principally Belgian franc, Canadian dollar, Irish punt and Japanese yen) and relating to particular anticipated but not yet committed purchases and sales expected to be denominated in those currencies. All of the currency derivatives expire within one year and are for United States dollar equivalents. At December 31, 1997, the Company had forward contracts to sell foreign currencies with face values of $4.1 (1996- $22.4) and forward contracts to buy foreign currencies with face values of $5.1 (1996-$23.3). The fair market value of these forward contracts to sell were $4.0 and $22.2 at December 31, 1997 and 1996, respectively. The fair market value of the forward contracts to buy were $4.9 and $23.2 at December 31, 1997 and 1996, respectively. At December 31, 1996, the Company had outstanding option contracts to sell foreign currencies with face values of $6.4 and to buy foreign currencies with face values of $14.7. The fair market value of these contracts was $6.3 and $15.2, respectively, at December 31, 1996. The counterparties to the options and contracts are major financial institutions. The risk of loss to the Company in the event of nonperformance by a counterparty is not significant. In accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS 52"), a transaction is classified as a hedge when the foreign currency is designated as, and is effective as, a hedge of a foreign currency commitment and the foreign currency commitment is firm. A hedge is considered by the Company to be effective when the transaction reduces the currency risk on its foreign currency commitments. If a transaction does not meet the criteria to qualify as a hedge, it is considered to be speculative. For a foreign currency commitment that is classified as a hedge, any gain or loss on the commitment is deferred and included in the basis of the underlying instrument. Any realized and unrealized gains or losses associated with foreign currency commitments that are classified as speculative are recognized in the current period and are included in selling and administration in the combined statements of income. If a foreign currency transaction previously considered as a hedge is terminated before the transaction date of the related commitment, any deferred gain or loss shall continue to be deferred and included in the basis of the underlying instrument. Premiums paid for currency options and gains or losses on forward sales and purchase contracts are not material to operating results. Foreign currency exchange gains (losses), net of taxes, were $.5 in 1997, $(3.3) in 1996, and $(.8) in 1995. Financial Instruments The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximated fair values due to the short-term maturities of these instruments. The fair value of the Company's long-term debt was determined based on current market rates for debt of the same risk and maturities. The fair values of currency forward and option contracts were estimated based on quoted market prices for contracts with similar terms. Stock-Based Compensation The Company accounts for stock-based compensation under SFAS No. 123 "Accounting for Stock-Based Compensation." As allowed under SFAS No. 123, the Company has chosen to account for stock-based compensation cost in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock F-10 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ($ in millions) Issued to Employees." Under this option, compensation cost is recorded when the fair market value of the Company's stock at the date of grant for fixed options exceeds the exercise price of the stock option. Olin's policy was to grant stock options with an exercise price equal to its common stock fair value on the date of grant. Accordingly, there are no charges reflected herein for stock options granted to employees. Compensation cost for restricted stock awards is accrued over the life of the award based on the quoted market price of the Company's stock at the date of the award. Prior to the Distribution, certain employees of the Company received restricted stock unit awards under Olin's stock-based compensation plans. The cost associated with the employees participating in these plans is included in the combined statements of income and is not material to operating results. Pro forma net income was calculated based on the following assumptions as if the Company had recorded compensation expense for the Olin stock options granted to those employees of the Specialty Chemicals business since 1995. The fair value of each Olin option granted during 1997, 1996, and 1995 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used: dividend yield of 2.8% in 1997, 4.0% in 1996 and 4.2% in 1995, risk free interest rate of 5.5% in 1997, 6.5% in 1996 and 1995, expected volatility of 21% in 1997, 22% in 1996 and 20% in 1995 and an expected life of 7 years. Pro forma net income as if the Company had recorded compensation expense for the Olin stock options granted was $55.6, $60.7, and $43.8 in 1997, 1996 and 1995, respectively. The pro forma amounts are not necessarily representative of the effects of stock-based awards on future pro forma net income because (1) future grants of employee stock options to Arch management may not be comparable to awards made to employees while Arch was a part of Olin and (2) the assumptions used to compute the fair value of any stock option awards may not be comparable to the Olin assumptions used. Interim Financial Statements (Unaudited) In the opinion of management, the information furnished in the unaudited interim combined financial statements reflects all adjustments necessary for a fair presentation of the financial position and results of operations as of September 30, 1998 and the nine month periods ended September 30, 1998 and 1997. The unaudited interim combined financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include some information and notes necessary to conform with the annual reporting requirements. Due to the fact that approximately 40% of the sales in the water chemicals business occur in the second calendar quarter of the year, the results of the Company's operations for the nine month's ended September 30, 1998 and 1997 may not be indicative of the Company's full year results. Trade Receivables Allowance for doubtful accounts was $4.4 and $4.3 at December 31, 1997 and 1996, respectively. Provision for doubtful accounts charged to operations was $.4, $0 and $1.4 in 1997, 1996 and 1995, respectively. Bad debt write-offs, net of recoveries, amounted to $.3, $1.3 and $.5 in 1997, 1996 and 1995, respectively. F-11 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ($ in millions) Inventories
Unaudited December 31, September 30, -------------- 1998 1997 1996 ------------- ------ ------ Raw materials and supplies $ 43.8 $ 48.2 $ 44.7 Work-in-Progress 18.5 13.1 17.2 Finished goods 113.1 129.4 122.6 ------ ------ ------ Inventories, gross 175.4 190.7 184.5 LIFO reserves (54.3) (51.6) (54.9) ------ ------ ------ Inventories, net $121.1 $139.1 $129.6 ====== ====== ======
Inventory valued using the LIFO method comprised 62% of the total inventory at September 30, 1998, 64% at December 31, 1997 and 60% at December 31, 1996. Gross inventory values approximate replacement cost. Property, Plant and Equipment
Unaudited December 31, September 30, ------------- 1998 1997 1996 ------------- ------ ------ Land and improvements to land $ 31.8 $ 31.8 $ 32.7 Building and building equipment 117.6 110.0 110.0 Machinery and equipment 576.5 576.5 535.0 Leasehold improvements 4.5 4.4 4.1 Construction-in-progress 90.9 57.3 44.7 ------ ------ ------ Property, plant and equipment 821.3 780.0 726.5 Less accumulated depreciation 516.2 499.6 469.2 ------ ------ ------ Property, plant and equipment, net $305.1 $280.4 $257.3 ====== ====== ======
Leased assets capitalized and included above are not significant. Maintenance and repairs charged to operations amounted to $37.9, $34.6 and $37.6 in 1997, 1996 and 1995, respectively. Long-Term Debt The financial statements include a $5.5 note floating with LIBOR which is due in monthly installments of $.05 commencing April 1, 1999 through 2009. The fair value of the Company's long-term debt was $4.4 at December 31, 1997 and 1996. Proforma Effect of Borrowings under the Credit Facility (Unaudited) Prior to the Distribution, the Company will succeed to a Credit Facility established by Olin. Olin expects to borrow $75 under the Five-year Facility prior to the Distribution, which liability will be assumed by the Company. F-12 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ($ in millions) The following represents the pro forma effects of borrowings assuming $75 is outstanding under the Five-year Facility for one full year and that the Company has seasonal weighted average borrowings related to the Water Chemicals Segment of $20 under the 364-day Facility at an aggregate effective rate of 7%.
Nine Months Ended September 30, Year Ended 1998 December 31, 1997 ----------------- ----------------- Pro forma effect on: Increase to Interest Expense........ $4.9 $6.6 Decrease to Net Income.............. 3.2 4.3
The pro forma effect on equity assuming the $75 was borrowed under the Credit Facility at September 30, 1998 and there were no outstanding borrowings at September 30, 1998 related to the seasonal borrowing for the Water Chemicals Segment is a reduction to equity of $75. Pension Plans and Retirement Benefits Virtually all U.S. employees of the Company are participants in one of several Olin pension benefit plans covering employees of other Olin businesses. Costs and expenses include accruals for pensions and post retirement medical and death benefits. Following the Distribution, the Company will establish a defined benefit pension plan for Company employees that will provide benefits based on service with Olin and with the Company. The Company will become liable for the payment of all pension plan benefits earned by Company employees prior to and following the Distribution who retire after the Distribution. Olin will transfer assets to the Company's pension plan and the amount of the assets will be calculated as required using the asset allocation methodology set forth in Section 4044 of the Employee Retirement Income Security Act of 1974, as amended. Olin will remain liable for post retirement medical and death benefits provided to former employees of the Company who retire prior to the Distribution. The Company will adopt a retiree medical and death benefits plan which largely replicates the Olin retiree medical and death benefit program. The Company will become liable for the payment of all retiree medical and death benefits earned by Company employees prior to and following the Distribution who retire after the Distribution. The Olin plan is an unfunded plan, therefore no assets will be transferred. The following tables reflect the components of the net pension cost, post retirement expense and the funded status of the portion of the Olin retirement plans, which represents the Company's share and are reflected in the Combined Financial Statements. F-13 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ($ in millions) Components of Net Pension Expense
Years Ended December 31, ------------------- 1997 1996 1995 ---- ----- ----- Service cost (benefits earned during the period) $ 6.1 $ 5.8 $ 3.9 Interest cost on the projected benefit obligation 4.6 4.2 3.2 Actual return on assets (5.8) (5.3) (4.8) Net amortization of unrecognized transition asset, prior service cost and deferred gains and losses .2 .2 .2 ----- ----- ----- Net pension expense $ 5.1 $ 4.9 $ 2.5 ===== ===== ===== Principal Assumptions Weighted average discount rate 7.25% 8.0% 7.5% Weighted average rate of compensation increase 4.5% 4.5% 4.5% Long-term rate of return on assets 9.5% 9.5% 9.5%
Funded Status of the Plans
December 31, ------------- 1997 1996 ----- ------ Accumulated benefit obligation including vested benefits of $52.9 and $39.3 $64.5 $ 46.5 ----- ------ Plan assets at fair value, primarily equity and fixed-income securities $73.4 $ 62.6 Projected benefit obligation for service rendered to date 81.0 58.8 ----- ------ Assets over (under) projected benefit obligation (7.6) 3.8 Unrecognized net transition asset (1.6) (2.1) Unrecognized gain (3.0) (14.5) Unrecognized prior service cost 5.5 6.2 ----- ------ Net pension liability $(6.7) $ (6.6) ===== ======
The Company's foreign subsidiaries maintain pension and other benefit plans which are consistent with statutory practices and are not significant. The Company provides certain post retirement health care and life insurance benefits for eligible active employees. Components of Post Retirement Expense
Years Ended December 31, ------------------- 1997 1996 1995 ----- ----- ----- Service costs-benefits earned during year $ .4 $ .5 $ .4 Interest cost on accumulated post retirement benefit obligation .4 .3 .3 Net amortization of unrecognized prior service cost and deferred gains and losses (.1) (.1) (.1) ----- ----- ----- Net post retirement expense $ .7 $ .7 $ .6 ===== ===== =====
F-14 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ($ in millions) Unfunded Liability for Post Retirement Benefits
December 31, -------------- 1997 1996 ------ ------ Accumulated post retirement benefit obligation: Fully eligible active plan participants $ 3.2 $ 2.6 Other active participants 3.2 2.3 ------ ------ Cumulative accumulated post retirement benefit obligation 6.4 4.9 Unrecognized loss (.9) (.3) Unrecognized prior service cost .5 .6 ------ ------ Net post retirement benefit liability $ 6.0 $ 5.2 ====== ======
The accumulated post retirement benefit obligation was determined using the projected unit credit method and an assumed discount rate of 7.25% in 1997, 8% in 1996 and 7.5% in 1995. The assumed health care cost trend rate used for pre-65 retirees was 9.7% in 1997, 11% in 1996 and 12.5% in 1995, declining one-half percent per annum to 5.5%. For post-65 retirees the Company provides a fixed dollar benefit which is not subject to escalation. A one percent increase each year in the health care cost trend rate used would have resulted in a $.1 increase in the aggregate service and interest components of expense for the year 1997, and a $.4 increase in the accumulated post retirement benefit obligation at December 31, 1997. Accrued and Non-Current Liabilities Included in accrued liabilities are the following items:
December 31, ----------- 1997 1996 ----- ----- Deferred income $10.4 $ 1.3 Other 52.6 52.4 ----- ----- Total accrued liabilities $63.0 $53.7 ===== =====
Included in other non-current liabilities are the following items:
December 31, ----------- 1997 1996 ----- ----- Deferred income $20.9 $ 3.0 Other 28.6 27.1 ----- ----- Total other non-current liabilities $49.5 $30.1 ===== =====
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 nine months ending September 30, 1998 and the year ending December 31, 1997 include $7.1 and $1.6, respectively, related to the amortization of the deferred income under such supply agreement. See "Dispositions." F-15 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ($ in millions) Income Taxes Components of Pretax Income
Years Ended December 31, --------------------------- 1997 1996 1995 -------- -------- -------- Domestic $ 64.4 $ 62.6 $ 38.3 Foreign 21.8 31.5 29.0 -------- -------- -------- Pretax income $ 86.2 $ 94.1 $ 67.3 ======== ======== ======== Components of Income Tax Expense Currently payable: Federal $ 20.5 $ 12.7 $ 16.1 State 6.8 4.7 5.9 Foreign 7.8 11.3 9.0 Deferred (5.2) 4.3 (7.6) -------- -------- -------- Income tax expense $ 29.9 $ 33.0 $ 23.4 ======== ======== ========
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, ---------------------------- 1997 1996 1995 -------- -------- -------- Statutory federal tax rate 35.0 35.0 35.0 Foreign income tax (3.5) (1.7) (1.7) State income taxes, net 4.2 2.5 2.5 Goodwill .7 .7 .6 Equity in net income of affiliates (1.5) (1.4) (1.8) Other, net (.2) -- .2 -------- -------- -------- Effective tax rate 34.7 35.1 34.8 ======== ======== ========
F-16 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ($ in millions) Components of Deferred Tax Assets and Liabilities
December 31, ----------- 1997 1996 ----- ----- Deferred tax assets Post retirement benefits $ 5.3 $ 5.3 Non-deductible reserves 22.3 16.8 Other miscellaneous items 4.5 5.3 ----- ----- Total deferred tax assets 32.1 27.4 ----- ----- Deferred tax liabilities Property, plant and equipment 8.5 11.4 Other miscellaneous items 2.4 -- ----- ----- Total deferred tax liabilities 10.9 11.4 ----- ----- Net deferred tax asset $21.2 $16.0 ===== =====
Included in Other Current Assets at December 31, 1997 and 1996, respectively, are $17.0 and $15.9 of net current deferred assets. Taxable income is expected to be sufficient to recover the net benefit within the period in which these differences are expected to reverse and, therefore, no valuation allowance was established. At December 31, 1997, the Company's share of the cumulative undistributed earnings of foreign subsidiaries was approximately $55.8. No provision has been made for U.S. or additional foreign taxes on the undistributed earnings of foreign subsidiaries since the Company intends to continue to reinvest these earnings. Foreign tax credits would be available to substantially reduce or eliminate any amount of additional U.S. tax that might be payable on these foreign earnings in the event of distributions or sale. Contributing Employee Ownership Plan Prior to the Distribution, Company employees participated in the Olin Corporation Contributing Employee Ownership Plan, which is a defined contribution plan available to essentially all domestic Olin employees and provides a match of employee contributions. The matching contribution allocable to the Company employees has been included in costs and expenses in the accompanying combined statements of income and was $3.1, $2.7 and $2.5 in 1997, 1996 and 1995, respectively. It is anticipated that the Company will adopt a similar plan subsequent to the Distribution. Long-Term Incentive Plan At the time of the Distribution, stock options issued by Olin will be converted into both an option to purchase Company common stock ("Company Options") and an option to purchase Olin common stock ("New Olin Options") with the same "intrinsic value" at the time of the Distribution as the old award. The conversion of the options will not result in a charge to earnings as no new measurement date will be created. The Company will be responsible for delivering shares of Company common stock upon exercise of Company Options, and Olin will be responsible for the delivery of shares of Olin Common stock upon exercise of New Olin Options. Options granted under the Olin 1980 Stock Option Plan to Olin employees who become Company employees upon the Distribution will terminate upon the earlier of (i) the end of their term or (ii) two years following the Distribution. Options granted to such employees under the Olin 1988 Stock Option Plan or the Olin 1996 Stock Option Plan will retain the original term of the option. Options granted to such employees under the Olin 1996 Stock Option Plan which are not yet vested at the time of the Distribution will continue to vest in accordance with their vesting schedule so long as the optionee remains employed at the Company. As of December 31, 1997 there were 2,446,463 Olin options outstanding, of which 1,250,358 were exercisable. F-17 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ($ in millions) It is anticipated that the Company will adopt 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. Shareholder Rights Plan It is anticipated that the Company will adopt a Shareholder Rights Plan which is designed to prevent an acquirer from gaining control of the Company without offering a fair price to all shareholders. Segment Information The Company has adopted SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information."
Unaudited Nine Months Ended September 30, Years Ended December 31, -------------- -------------------------- 1998 1997 1997 1996 1995 ------ ------ -------- -------- -------- Sales: Microelectronic Chemicals $176.5 $179.9 $ 242.6 $ 232.9 $ 168.1 Water Chemicals 258.0 253.6 286.9 293.7 304.9 Performance Chemicals 259.9 294.6 400.4 386.9 399.8 ------ ------ -------- -------- -------- Total Sales $694.4 $728.1 $ 929.9 $ 913.5 $ 872.8 ====== ====== ======== ======== ======== Operating Income (Loss): Microelectronic Chemicals $ (0.6) $ 9.2 $ 9.5 $ 16.9 $ 21.0 Water Chemicals 21.7 29.8 26.5 24.1 7.9 Performance Chemicals 41.4 34.5 50.1 52.3 31.4 ------ ------ -------- -------- -------- Total Operating Income $ 62.5 $ 73.5 $ 86.1 $ 93.3 $ 60.3 ====== ====== ======== ======== ======== Equity Income in Affiliated Companies, Included in Operating Income: Microelectronic Chemicals $ 1.1 $ 3.0 $ 4.5 $ 4.4 $ 4.3 Water Chemicals 1.7 2.0 2.6 3.2 1.3 ------ ------ -------- -------- -------- Total Equity Income in Affiliated Companies, Included in Operating Income $ 2.8 $ 5.0 $ 7.1 $ 7.6 $ 5.6 ====== ====== ======== ======== ======== Depreciation Expense: Microelectronic Chemicals $ 10.2 $ 8.7 $ 13.1 $ 8.9 $ 4.4 Water Chemicals 8.7 7.4 10.4 10.1 12.4 Performance Chemicals 12.5 16.3 20.1 21.2 24.6 ------ ------ -------- -------- -------- Total Depreciation Expense $ 31.4 $ 32.4 $ 43.6 $ 40.2 $ 41.4 ====== ====== ======== ======== ======== Amortization Expense: Microelectronic Chemicals $ 2.8 $ 2.8 $ 3.7 $ 4.0 $ 2.2 Water Chemicals 0.1 -- 0.1 -- -- ------ ------ -------- -------- -------- Total Amortization Expense $ 2.9 $ 2.8 $ 3.8 $ 4.0 $ 2.2 ====== ====== ======== ======== ======== Capital Spending: Microelectronic Chemicals $ 33.1 $ 24.9 $ 39.8 $ 22.2 $ 32.3 Water Chemicals 7.2 12.1 16.2 14.6 20.8 Performance Chemicals 11.9 6.0 15.0 16.4 12.3 ------ ------ -------- -------- -------- Total Capital Spending $ 52.2 $ 43.0 $ 71.0 $ 53.2 $ 65.4 ====== ====== ======== ======== ======== Investments in and Advances to Affiliated Companies at Equity: Microelectronic Chemicals $ -- $ -- $ -- $ -- $ -- Water Chemicals -- -- -- 1.2 1.3 ------ ------ -------- -------- -------- Total Investments in and Advances to Affiliated Companies at Equity $ -- $ -- $ -- $ 1.2 $ 1.3 ====== ====== ======== ======== ========
F-18 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ($ in millions)
Unaudited December 31, September 30, ------------- 1998 1997 1996 ------------- ------ ------ Total Assets: Microelectronic Chemicals $303.5 $286.5 $259.1 Water Chemicals 178.5 182.1 171.0 Performance Chemicals 172.6 171.6 178.2 Other 36.6 53.0 42.9 ------ ------ ------ Total Assets $691.2 $693.2 $651.2 ====== ====== ====== Investment & Advances--Affiliated Companies at Equity: Microelectronic Chemicals $ 8.8 $ 10.0 $ 9.0 Water Chemicals 11.1 11.1 11.3 ------ ------ ------ Total Investment & Advances--Affiliated Companies at Equity $ 19.9 $ 21.1 $ 20.3 ====== ====== ======
Segment operating income includes the equity in the net income of investees accounted for by the equity method which is included in other income on the combined statements of income and does not include interest income or interest expense. Segment operating income includes an allocation of corporate charges based on various allocation basis. Segment assets include only those assets which are directly identifiable to a segment and do not include such items as cash, deferred taxes and other assets. Sales by segment substantially represent sales for the three major product lines of the Company.
Years Ended December 31, ---------------------- 1997 1996 1995 ------ ------ ------ Sales United States $719.8 $690.6 $673.2 Foreign 210.1 222.9 199.6 Transfers between areas United States 68.9 57.2 48.1 Foreign 1.9 1.6 2.0 Eliminations (70.8) (58.8) (50.1) ------ ------ ------ Total Sales $929.9 $913.5 $872.8 ====== ====== ======
December 31, --------------- 1997 1996 ------- ------ Total Assets United States $ 516.7 $459.7 Foreign 284.2 249.0 Investments 10.9 6.9 Eliminations (118.6) (64.4) ------- ------ Total Assets $ 693.2 $651.2 ======= ======
Transfers between geographic areas are priced generally at prevailing market prices. Export sales from the United States to unaffiliated customers were $93.6, $102.4, and $92.8 in 1997, 1996, and 1995, respectively. F-19 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ($ in millions) Acquisitions In 1995, the Company acquired the remaining 50% of OCG Microelectronic Materials, a joint venture formed by Ciba-Geigy and the Company in 1990, for approximately $65. In addition, the Company acquired the remaining 51% of Etoxyl, C.A., a Venezuelan joint venture. The purchase price is contingent upon future earnings of this venture. These acquisitions were accounted for as purchases and accordingly, their results of operations, which were not material, are included in the combined financial statements from the dates of acquisition. Supplemental cash flow information on businesses acquired is as follows:
Year Ended December 31, 1995 ------------ Working Capital $ 39.5 Property, Plant and Equipment 44.6 Other Assets 14.2 Goodwill 16.8 Debt (27.3) Investments and Advances (23.2) ------ Purchase Price $ 64.6 ======
Dispositions In November 1997, the Company completed a transaction with BASF whereby the Company received $42 for the sale of its performance chemicals' surfactants business and a three-year supply agreement. Of the proceeds received, $12 was allocated to the sale of the surfactants business based on the fair value of such business and $30 was allocated to the supply agreement. No gain or loss was recorded on the sale. In the supply agreement, the Company agreed to reserve production capacity for surfactants products at its Brandenburg, Kentucky facility and to supply BASF with such products in exchange for a $30 payment made at the time of signing the agreement plus recovery of all fixed and variable costs during the term of the agreement. The agreement expires on December 31, 2000 unless extended; the Company does not believe it will be extended. The $30 payment was recorded as deferred income and is being amortized ratably into operating income over the three-year period. Unless the supply agreement is extended beyond 2000, which the Company does not expect to happen, no future income will be realized with respect to this supply agreement after December 31, 2000. During 1996 the Company sold its electrostatics business. During 1995, the Company sold its dry sanitizer plant in South Charleston, West Virginia, a related tableting operation in Livonia, Michigan, and Sun(R) brand of isocyanurates. Supplemental cash flow information on the businesses sold is as follows:
Years Ended December 31, -------------------------- 1997 1996 1995 -------- -------- -------- Proceeds $ 12.0 $ 5.5 $ 48.7 Working Capital (9.0) (5.5) (4.0) Property, Plant and Equipment -- (2.0) (33.8) Other Assets (.2) 3.0 3.2 Other Liabilities (2.8) (1.0) (7.1) ------- ------- -------- Gain on Disposition of Business $ -- $ -- $ 7.0 ======= ======= ========
F-20 ARCH CHEMICALS, INC. NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued) ($ in millions) Environmental Olin and the Company have entered into an agreement which specifies that the Company is only responsible for environmental liabilities at the Company's current operating plant sites and certain offsite locations. Olin will retain the liability for all former plant sites and former waste disposal sites. In 1997, in connection with the sale of the surfactants business a $2.3 provision was recorded to provide for future environmental spending at the Brandenburg, Kentucky site. The combined balance sheets include liabilities for future environmental expenditures to investigate and remediate known sites amounting to $2.3, $3.2 and $.9 at September 30, 1998, December 31, 1997 and December 31, 1996, respectively, all of which are classified as other noncurrent liabilities. Environmental exposures are difficult to assess for numerous reasons, including the identification of new sites, developments at sites resulting from investigatory studies, advances in technology, changes in environmental laws and regulations and their application, the scarcity of reliable data pertaining to identified sites, the difficulty in assessing the involvement and financial capability of other potentially responsible parties and the Company's ability to obtain contributions from other parties and the length of time over which site remediation occurs. Commitments and Contingencies The Company leases certain properties, such as manufacturing, warehousing and office space, data processing and office equipment. Leases covering these properties generally contain escalation clauses based on 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 $17.4 in 1997, $17.5 in 1996 and $17.8 in 1995 (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, 1997 are as follows: $7.8 in 1998; $7.0 in 1999; $5.6 in 2000; $4.3 in 2001; $2.8 in 2002; and $11.9 thereafter. There are a variety of non-environmental legal proceedings pending or threatened against the Company. Those matters that are probable have been accrued for in the accompanying financial statements. Any contingent amounts in excess of amounts accrued are not expected to have a material adverse effect on results of operations, financial position or liquidity of the Company. Related Party Transactions Olin sells chlorine and caustic to the Company which is used primarily in the production of calcium hypochlorite and chlorinated isocyanurates. These product purchases aggregated $22.8 in 1997, $23.7 in 1996, and $23.5 in 1995 and are reflected in cost of goods sold on the combined statements of income for the respective periods. Settlement of these inter-company sales occurred at the time of shipments by way of the inter-company account. The Company is charged by Olin for the Company's share of expenses of certain centralized activities using various allocation bases. These activities include, but are not limited to, administration of employee benefit programs, tax compliance, management information systems, treasury, legal and general corporate functions. Cumulative charges to the Company for centralized corporate services were $31.8 in 1997, $27.7 in 1996 and $25.3 in 1995. F-21 -----END PRIVACY-ENHANCED MESSAGE-----