-----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, OO8WWc0f0bUz+hirM57r/vx2punp0u26pOyhtU7MoP6bUdoOISO8XGo3PfzxeRe/ wk5g8fzMNcZZk7uBbKiNFQ== 0000950130-99-001465.txt : 19990317 0000950130-99-001465.hdr.sgml : 19990317 ACCESSION NUMBER: 0000950130-99-001465 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLIN CORP CENTRAL INDEX KEY: 0000074303 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 131872319 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-01070 FILM NUMBER: 99566380 BUSINESS ADDRESS: STREET 1: 501 MERRITT 7 STREET 2: P O BOX 4500 CITY: NORWALK STATE: CT ZIP: 06856 BUSINESS PHONE: 2037503000 MAIL ADDRESS: STREET 1: OLIN CORP STREET 2: 501 MERRITT 7 PO BOX 4500 CITY: NORWALK STATE: CT ZIP: 06851 FORMER COMPANY: FORMER CONFORMED NAME: OLIN MATHIESON CHEMICAL CORP DATE OF NAME CHANGE: 19691008 10-K405 1 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- Form 10-K (Mark One) [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 OR [_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-1070 Olin Corporation (Exact name of registrant as specified in its charter) Virginia 13-1872319 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 06856-4500 501 Merritt 7 (Zip Code) P.O. Box 4500 Norwalk, CT (Address of principal executive offices) Registrant's telephone number, including area code: (203) 750-3000 --------------- Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange Title of each class on which registered ------------------- ----------------------- Common Stock, New York Stock Exchange par value $1 per share Chicago Stock Exchange Pacific Stock Exchange Series A Participating Cumulative Preferred New York Stock Exchange Stock Purchase Rights Chicago Stock Exchange Pacific Stock Exchange
--------------- Securities registered pursuant to Section 12(g) of the Act: None --------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --------------- As of January 31, 1999, the aggregate market value of registrant's common stock, par value $1 per share ("Common Stock") held by non-affiliates of registrant was approximately $1,073,761,590. --------------- As of January 31, 1999, 45,963,259 shares of the registrant's common stock were outstanding. --------------- DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents are incorporated by reference in this Form 10-K as indicated herein:
Part of 10-K Document into which incorporated -------- ----------------------- Proxy Statement relating to Olin's 1999 Annual Meeting of Shareholders Part III
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART I Item 1. Business General Olin Corporation is a Virginia corporation, incorporated in 1892, having its principal executive offices in Norwalk, Connecticut. It is a manufacturer concentrated in three business segments: Chlor Alkali Products, Metals and Winchester. Chlor Alkali Products include chlorine and caustic soda, sodium hydrosulfite and high strength bleach products. Metals products include copper and copper alloy sheet, strip, welded tube and fabricated parts, and stainless steel strip. The Metals segment also includes a network of metals service centers in the continental U. S. and Puerto Rico. Winchester products include sporting ammunition, canister powder, reloading components, small caliber military ammunition and industrial cartridges. The Winchester segment also manages government arsenals. The terms "Olin" and the "Company" as used herein mean Olin Corporation and its subsidiaries, unless the context indicates otherwise. Effective February 8, 1999, Olin distributed to its shareholders all of the outstanding common stock of Arch Chemicals, Inc. ("Arch Chemicals"), a Virginia corporation formed to hold all of Olin's specialty chemical businesses (the "Spin-Off"). Products and Services The following is a list of the principal and certain other products and services provided by Olin and its affiliates after the Spin-Off within each industry segment. Principal products on the basis of annual sales are highlighted in bold face. CHLOR ALKALI PRODUCTS
Major Raw Materials Products & Plants & & Components for Services Major End-Uses Facilities* Products/Services - ---------- ---------------------------------- ---------------- ----------------- CHLORINE/CAUSTIC Pulp & paper processing, chemical Augusta, GA salt, electricity SODA manufacturing, water purification, Charleston, TN manufacture of vinyl chloride, McIntosh, AL bleach, swimming pool chemicals & Niagara Falls, urethane chemicals NY - ------------------------------------------------------------------------------------------ Sodium Paper, textile & clay bleaching Augusta, GA caustic soda, Hydrosulfite Charleston, TN sulfur dioxide Salto, Brazil - ------------------------------------------------------------------------------------------ HyPure(TM) Industrial & institutional Charleston, TN chlorine, caustic products cleaners, textile bleaching soda
- ------------------------------------------------------------------------------- * If site is not operated by Olin or a majority-owned, direct or indirect subsidiary, name of joint venture, affiliate or operator is indicated. Sites manufacture, distribute or market one or more of the identified products or services. 2 METALS
Major Raw Materials Products & Plants & & Components for Services Major End-Uses Facilities* Products/Services - ---------- ---------------------------------- ---------------- ----------------- COPPER & COPPER Electronic connectors, lead Bryan, OH copper, zinc & ALLOY SHEET & frames, electrical components, East Alton, IL other nonferrous STRIP (STANDARD & communications, automotive, Indianapolis, IN metals HIGH PERFORMANCE) builders' hardware, coinage, Waterbury, CT ammunition Iwata, Japan (Yamaha-Olin Metal Corporation) - ------------------------------------------------------------------------------------------ Network of metals Electronic connectors, electrical Allentown, PA copper & copper service centers components, communications, Alliance, OH alloy sheet, automotive, builders' hardware, Caguas, PR strip, tube & household products Carol Stream, IL steel & aluminum Warwick, RI strip Watertown, CT Yorba Linda, CA - ------------------------------------------------------------------------------------------ POSIT-BOND(R) CLAD Coinage strip & blanks East Alton, IL cupronickel, METAL copper & aluminum - ------------------------------------------------------------------------------------------ ROLLED COPPER Printed circuit boards, electrical Waterbury, CT copper, zinc & FOIL, & electronic, automotive other nonferrous COPPERBOND(R) metals, FOIL, STAINLESS stainless steel STEEL STRIP - ------------------------------------------------------------------------------------------ COPPER ALLOY Utility condensers, industrial Cuba, MO copper, zinc & WELDED TUBE heat exchangers, refrigeration & other nonferrous air conditioning, builders' metals hardware, automotive - ------------------------------------------------------------------------------------------ Fabricated Builders' hardware, cartridge East Alton, IL brass & products cases, shaped charge cones, stainless steel transportation, household & strip recreational products - ------------------------------------------------------------------------------------------ Olin Aegis: High All industry market segments; New Bedford, MA all metals, performance, high computer, communications, medical, metal alloys, reliability, industrial, instrumentation, metal matrix hermetic metal automotive, consumer, aerospace composites, packages for and military special alloys microelectronics and glasses industry
- -------------------------------------------------------------------------------- * If site is not operated by Olin or a majority-owned, direct or indirect subsidiary, name of joint venture, affiliate or operator is indicated. Sites manufacture, distribute or market one or more of the identified products or services. 3 WINCHESTER
Major Raw Materials & Products & Plants & Components for Services Major End-Uses Facilities* Products/Services - ---------- ---------------------------------- ---------------- ----------------- WINCHESTER(R) Hunters & recreational shooters, East Alton, IL brass, lead, SPORTING law enforcement agencies Geelong, steel, plastic, AMMUNITION (SHOT- Australia propellant, SHELLS, SMALL explosives CALIBER CENTERFIRE & RIMFIRE AMMUNITION) - ------------------------------------------------------------------------------------------ Small caliber Infantry and mounted weapons East Alton, IL brass, lead, military propellant, ammunition explosives - ------------------------------------------------------------------------------------------ Government-owned Maintenance and operation of U.S. Independence, MO brass, lead, arsenal operation Army small caliber military propellant, (GOCO) ammunition production plant explosives, government- supplied components ------------------------------------------------------------------------- Maintenance of U.S. Army laid-away Baraboo, WI subcontracted & Production plant government- supplied components - ------------------------------------------------------------------------------------------ Industrial Maintenance applications in power East Alton, IL brass, lead, products (8 gauge & concrete industries, powder- Geelong, plastic, loads & powder- actuated tools in construction Australia propellant, actuated tool industry explosives loads)
- -------------------------------------------------------------------------------- * If site is not operated by Olin or a majority-owned, direct or indirect subsidiary, name of joint venture, affiliate or operator is indicated. Sites manufacture, distribute or market one or more of the identified products or services. 4 Spin-Off of Arch Chemicals On July 29, 1998 the Board of Directors of Olin approved in principle a plan to distribute Olin's specialty chemical businesses to its shareholders as a separate public company, Arch Chemicals, which was incorporated on August 25, 1998. The Spin-Off was effective on February 8, 1999, when Olin distributed to its shareholders one share of Arch Chemicals Common Stock for each two shares of Olin Common Stock held of record on February 1, 1999. The businesses transferred by Olin to Arch Chemicals fall within three segments: microelectronic chemicals, water chemicals and performance chemicals. The microelectronic chemicals segment consists of the manufacture and supply of a range of products and services to semiconductor manufacturers and to flat panel display manufacturers. The microelectronic chemicals segment includes a variety of high purity acids, bases, oxidizers, etchants and solvents. The microelectronic chemicals segment has also manufactured a wide range of photoresist and ancillary products encompassing negative, g-line, I- line and 248nm deep UV technologies to meet the needs of the semiconductor industry. The water chemicals segment includes chemicals manufactured and sold and equipment distributed on a worldwide basis for the sanitization and recreational use of residential and commercial pool water and the purification of potable water, including calcium hypochlorite and chlorinated isocyanurates. The performance chemicals segment consists of the manufacture and sale of a broad range of products with diverse end uses. The performance chemicals segment manufactures flexible polyols, specialty polyols, urethane systems and glycol and glycol ethers, biocides that control the growth of micro-organisms, hydrazine hydrates as well as propellant grade hydrazine and hydrazine derivatives and supplies sulfuric acid regeneration services and virgin sulfuric acid sales. 1998 Developments In April 1998, the Board of Directors of Olin authorized the purchase of up to 5 million shares, or approximately 10%, of the then-outstanding Common Stock of Olin. During 1998, Olin repurchased 1.9 million shares under this program and repurchased an additional 1.2 million shares under a repurchase program authorized by the Board of Directors in October 1997. In September 1998, Olin recorded a $42 million pretax charge ($0.55 diluted earnings per share) related to the sale of the microelectronic packaging unit at Manteca, California for $4 million in cash, and the restructuring of its rod, wire and tube businesses at Indianapolis, Indiana. In December 1998, Olin recorded a $21 million pretax charge ($.32 diluted earnings per share) related to the Spin-Off of Arch Chemicals. International Operations Olin has sales offices and subsidiaries in various countries which support the worldwide export of products from the United States as well as overseas production facilities. In addition, Olin has manufacturing interests in Brazil. Yamaha-Olin Metal Corporation, a joint venture with Yamaha Corporation, manufactures high-performance copper alloys in Japan for sale to the electronics industry throughout the Far East. An Olin subsidiary loads and packs sporting and industrial ammunition in Australia. See the Note "Segment Information" of the Notes to Consolidated Financial Statements in Item 8, for geographic segment data which are incorporated by reference. Customers and Distribution During 1998, no single customer accounted for more than 2.4% of Olin's total consolidated sales. Products which Olin sells to industrial or commercial users or distributors for use in the production of 5 other products constitute a major part of Olin's total sales. Some of its products, such as sporting ammunition and brass, are sold to a large number of users or distributors, while others, such as chlorine and caustic soda, are sold in substantial quantities to a relatively small number of industrial users. Most of Olin's products and services are marketed primarily through its sales force and sold directly to various industrial customers, the U.S. Government and its prime contractors, to wholesalers and other distributors. Chlor Alkali Products. Principal customers of Olin's Chlor Alkali products include the pulp and paper industries, vinyl chloride and urethane manufacturers and household and industrial cleaner suppliers. Metals. Principal customers of Olin's copper and copper alloy strip, sheet and welded tube include producers of electrical and electronic equipment, builders' hardware and appliances, the plumbing, automotive and air- conditioning industries and manufacturers of a variety of consumer goods. Olin manufactures cartridge brass for its ammunition business and for other ammunition makers. Olin also serves numerous high-technology markets through a thin-gauge reroll operation that produces stainless steels, high-temperature alloys and glass sealing alloys, in addition to copper and copper alloys. Posit-Bond(R) clad metal has made Olin a major supplier of metal to the U.S. Mint. Olin also sells various alloys to foreign governments for coinage purposes. The Metals business is also focused on the electronics market, providing high performance and high-quality materials needed by the electronics industry and other advanced technology customers. These materials include Olin- developed proprietary alloys and Copperbond(R) treated copper foil marketed to the printed circuit industry. Fabricated products are principally sold to ammunition manufacturers, the U.S. Armed Forces, building product suppliers, household product manufacturers and automotive manufacturers. Winchester. The principal users of the Winchester products are recreational shooters, hunters, law enforcement agencies, the power and concrete industries, the construction industry, the U.S. Armed Forces and certain allied governments. Because Olin engages in some government contracting activities and makes sales to the U.S. Government, it 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 munitions and other controlled products and commodities could subject Olin or one or more of its businesses to civil and criminal penalties, and under certain circumstances, suspension and debarment from future government contracts and the exporting of products for a specified period of time. Competition Olin is in active competition with businesses producing the same or similar products, as well as, in some instances, with businesses producing different products designed for the same uses. With respect to certain product groups, such as ammunition and copper alloys, and with respect to certain chlor alkali products, Olin is among the large manufacturers or distributors in the United States. Olin encounters competition in price, delivery, service, performance, product innovation, product recognition and quality, depending on the product involved. 6 Employees As of December 31, 1998, after adjusting for the effects of the Spin-off, Olin had approximately 6,400 employees (excluding approximately 1,000 employees at Government-owned, contractor-operated facilities and excluding employees of disposed businesses, including Arch Chemicals), approximately 6,300 of whom were working in the United States and approximately 100 of whom were working in foreign countries. A majority of the hourly-paid employees are represented, for purposes of collective bargaining, by various labor unions. Some labor contracts extend for as long as five years, but during most years new agreements must be negotiated in a number of Olin's plants, although Olin has no major labor contracts scheduled to expire in 1999. While relations between Olin and its employees and their various representatives are generally considered satisfactory, there can be no assurance that new labor contracts can be concluded without work stoppages. No major work stoppages have occurred in the last three years. Research Activities; Patents Olin's research activities are conducted on a product-group basis at a number of facilities. Company-sponsored research expenditures were approximately $10 million during 1998, $8 million during 1997 and $20 million during 1996. Olin owns, or is licensed under, a number of patents, patent applications and trade secrets covering its products and processes. Olin believes that, in the aggregate, the rights under such patents and licenses are important to its operations, but does not consider any patent or license or group thereof related to a specific process or product to be of material importance when viewed from the standpoint of Olin's total business. Raw Materials and Energy Olin purchases the major portion of its raw material requirements. The principal basic raw materials purchased by Olin for its production of chlor alkali products are salt, electricity, and sulfur. Copper, zinc and various other nonferrous metals are required for the metals business. Lead, brass and propellant are the principal raw materials used in the Winchester business. Olin's principal basic raw materials are typically purchased pursuant to multiyear contracts. In the manufacture of ammunition, Olin uses a substantial percentage of its own output of cartridge brass. Additional information with respect to specific raw materials is set forth in the table above under the caption entitled "Products and Services." Electricity is the predominant energy source for Olin's manufacturing facilities. Most of Olin's facilities are served by utilities which generate electricity principally from coal, hydro and nuclear power. Environmental and Toxic Substances Controls
1998 1997 1996 ---- ---- ---- ($ in millions) Cash Outlays: Remedial and Investigatory Spending................... $20 $31 $30 Capital Spending...................................... 2 2 3 Plant Operations...................................... 17 15 16 --- --- --- Total Cash Outlays...................................... $39 $48 $49 === === ===
The establishment and implementation of federal, state and local standards to regulate air, water and land quality has affected and will continue to affect substantially all of Olin's manufacturing 7 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, particularly the chemicals industry. In addition, implementation of environmental laws, such as the Resource Conservation and Recovery Act and the Clean Air Act, has required and will continue to require new capital expenditures and will increase operating costs. Olin is enrolled in the United States Environmental Protection Agency's Voluntary Industrial Toxics Reduction Program. Olin employs waste minimization and pollution prevention programs at its manufacturing sites. Olin is party to various governmental and private environmental actions associated with waste disposal sites and manufacturing facilities. 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 material to operating results in the past three years and may be material to net income in future years. Such charges to income were $16 million, $17 million and $70 million in 1998, 1997 and 1996, respectively. Cash outlays for remedial and investigatory activities associated with former waste sites and past operations were not charged to income but instead were charged to reserves established for such costs identified and expensed to income in prior years. 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. Historically, Olin has funded its environmental capital expenditures through cash flow from operations and expects to do so in the future. Olin's estimated environmental liability is attributable to 51 sites, 16 of which were on the National Priority List ("NPL"). Ten sites accounted for approximately 79% of such liability and, of the remaining sites, no one site accounted for more than 2% of such liability. Two of these ten sites were in the investigatory stage of the remediation process. In this stage, remedial investigation and feasibility studies are conducted by either Olin, the United States Environmental Protection Agency ("EPA") or other potentially responsible parties ("PRP's") and a Record of Decision ("ROD") or its equivalent has not yet been issued. At another six of the ten sites, a ROD or its equivalent has been issued by either the EPA or responsible state agency and Olin, either alone or as a member of a PRP group, was engaged in performing the remedial measures required by that ROD. At the remaining two of the ten sites, part of the site is subject to a ROD and another part is still in the investigative stage of remediation. All ten sites were either former manufacturing facilities or waste sites containing contamination generated by those facilities. The Company's consolidated balance sheets included liabilities for future environmental expenditures to investigate and remediate known sites amounting to $129 million at December 31, 1998 and $133 million at December 31, 1997, of which $99 million and $103 million were classified as other noncurrent liabilities, respectively. Those amounts did not take into account any discounting of future expenditures or any consideration of insurance recoveries or advances in technology. Those liabilities are reassessed periodically to determine if environmental circumstances have changed and/or remediation efforts and their costs 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 1999 are estimated to be $54 million, of which $30 million is expected to be spent on remedial and investigatory efforts, $7 million on capital projects and $17 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 $50-$60 million over the next several years. While Olin does not anticipate a material increase in the projected annual level of its environmental- 8 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 Olin's ability to obtain contributions from other parties and the lengthy time periods over which site remediation occurs. It is possible that some of these matters (the outcomes of which are subject to various uncertainties) may be resolved unfavorably against Olin. At December 31, 1998, Olin had estimated additional environmental contingent liabilities of $40 million. See also Item 3, "Legal Proceedings" below, the Note "Environmental" of the Notes to Consolidated Financial Statements contained in Item 8, and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." Item 2. Properties Olin has manufacturing sites at 15 separate locations in 12 states and Puerto Rico and two manufacturing sites in two foreign countries. Most manufacturing sites are owned although a number of small sites are leased. Listed under Item 1 above in the table set forth under the caption "Products and Services" are the locations at or from which Olin's products and services are manufactured, distributed or marketed by segment. Olin leases warehouses, terminals and distribution offices and space for executive and branch sales offices and service departments throughout the country and overseas. Item 3. Legal Proceedings (a) In 1979, an action was commenced in the U.S. District Court in New York by the United States against Occidental Chemical Corporation (then known as Hooker Chemical & Plastics Corporation) ("Oxychem"), certain related companies, Olin and the City of Niagara Falls, New York, alleging that chemical wastes were migrating in violation of environmental laws or regulations from a site in Niagara Falls where Oxychem and Olin own adjacent, inactive chemical waste landfills. The United States sought injunctive relief and an order requiring Oxychem and Olin, among other things, to secure the landfill site, install a leachate collection system and treat whatever leachate is collected, as well as an order requiring Oxychem and Olin to place $16.5 million in trust or provide a bond to ensure that the site will be secured. The United States also sought civil penalties for each day of alleged violation of the Clean Water Act which currently has a maximum daily penalty of $27,500. In 1980, the State of New York (the "State") filed a complaint as co- plaintiff in the same action based upon essentially the same factual allegations as in the suit brought by the United States. The State is seeking $100 million in compensatory damages and $100 million in punitive damages. The State also requested a court order to abate the alleged nuisance and penalties of $10,000 per day for alleged violations of each of four provisions of New York's Environmental Conservation Law. In 1983, the State filed a motion to amend its complaint to include a count under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA") alleging damage to natural resources. In 1986, the Department of Justice filed a motion to amend its complaint to include a CERCLA and SARA (Superfund Amendments and Reauthorization Act of 1986) count. Oxychem and Olin have filed an opposition to the motions and the court deferred a ruling on both motions. Under stipulations, Olin and Oxychem conducted a remedial investigation and feasibility study. In 1990, the EPA issued a Proposed Remedial Action Plan followed by a ROD. In 1991, the EPA issued 9 an administrative order directing Olin and Oxychem to implement the remedy identified in the ROD. Remediation of the site has been completed. Olin and Oxychem have negotiated the terms of a settlement agreement with the EPA and the State of New York, under which Olin and Oxychem will pay oversight costs on the project. Olin believes, but there can be no assurance, that the settlement agreement will be executed and submitted to the court for approval in 1999. See "Environmental Matters" contained in Item 7--Management's Discussion and Analysis of Financial Condition and Results of Operations. (b) In 1987, the EPA issued a ROD recommending remedial actions and ecological studies with respect to mercury contamination at the site of Olin's former mercury cell Chlor Alkali plant in Saltville, Virginia. The EPA, under Section 122 of CERCLA, asked Olin to undertake the work called for in the ROD, and Olin agreed to do so. In November 1988, Olin submitted to the EPA, a work plan for remedial action, including additional stormwater run-off control around Pond #5 and construction of a wastewater treatment plant for the outfall from Pond #5. Olin then implemented that remedial action. Olin completed the remedial investigation and feasibility study of the former chlorine plant site, including Ponds # 5 and 6, in 1994. The EPA issued a ROD in 1995, calling for covering the former waste ponds, treatment of runoff from the ponds, and additional monitoring and investigation. In 1997, Olin negotiated a consent decree with the EPA under which Olin is implementing the ROD. The ROD does not address remediation of the former chlorine plant site or the Holston River, which are the subject of the additional studies. Olin has completed clean-up activities at two small locations near Olin's former plant site, the Graveyard Dump Site and the former power plant. In October 1996, Olin met with the site's Natural Resources Trustees at the Trustee's request. At that time, Olin indicated a willingness to cooperate in assessing whether there are any natural resource damages to the Holston River associated with releases from the site. Olin believes that any liability incurred by it in this matter will not be materially adverse to its financial condition or liquidity. See "Environmental Matters" contained in Item 7--Management's Discussion and Analysis of Financial Condition and Results of Operations. (c) As part of the continuing environmental investigation by federal, state and local governments of waste disposal sites, Olin has entered into a number of settlement agreements requiring it to contribute to the cost of the investigation and cleanup of a number of sites. This process of investigation and cleanup is expected to continue. See "Environmental Matters" contained in Item 7--Management's Discussion and Analysis of Financial Condition and Results of Operations. (d) Olin and its subsidiaries are defendants in various other legal actions arising out of their normal business activities, none of which is considered by management to be material. 10 Item 4. Submission of Matters to a Vote of Security Holders No matter was submitted to a vote of security holders during the three months ended December 31, 1998. Executive Officers of Olin Corporation as of March 1, 1999
Served as an Olin Officer Name and Age Office Since ------------ ------ --------- Donald W. Griffin (62)........... Chairman of the Board, 1983 President and Chief Executive Officer Anthony W. Ruggiero (57)......... Executive Vice President and 1995 Chief Financial Officer Peter C. Kosche (56)............. Senior Vice President, 1993 Corporate Affairs George B. Erensen (55)........... Vice President and General Tax 1990 Counsel Thomas M. Gura (53).............. Vice President and President, 1997 Winchester Division Johnnie M. Jackson, Jr. (53)..... Vice President, General Counsel 1995 and Secretary John L. McIntosh (44)............ Vice President and President, 1999 Chlor Alkali Products Division Janet M. Pierpont (51)........... Vice President and Treasurer 1990 Joseph D. Rupp (48).............. Vice President and President, 1996 Brass Division
No family relationship exists between any of the above named executive officers or between any of them and any Director of Olin. Such officers were elected to serve as such, subject to the By-laws, until their respective successors are chosen. Each of the above-named executive officers, except T.M. Gura, J.M. Jackson, J.L. McIntosh, A.W. Ruggiero, and J.D. Rupp, has served Olin as an executive officer for not less than the past five years. Thomas M. Gura was elected a Corporate Vice President on September 25, 1997. He was appointed President of the Winchester Division on August 19, 1997. Prior to that time, he served as Vice President, Marketing and Sales of the Brass Division. Johnnie M. Jackson, Jr. was elected a Corporate Vice President on April 27, 1995 and Corporate Secretary on April 29, 1993. Prior to that time, since 1989, he has served Olin in the following capacities: General Counsel-- Corporate Resources and Secretary, Associate General Counsel--Corporate Resources and Secretary and Deputy General Counsel. John L. McIntosh was elected a Corporate Vice President on February 1, 1999. Prior to that time, since 1997, he served as Vice President, Operations for Olin's specialty chemicals operations. He also served as Vice President, Manufacturing and Engineering for Chlor Alkali and was Director of Manufacturing, Engineering and Purchasing for that division from 1991 through 1997. Anthony W. Ruggiero joined Olin on August 30, 1995 and was elected a Corporate Senior Vice President and Chief Financial Officer on September 29, 1995, and became Executive Vice President on January 1, 1999. From 1990 to 1995, he served as Senior Vice President and Chief Financial Officer of The Reader's Digest Association, Inc. He joined Squibb Corporation in 1969 and served as Senior Vice President and Chief Financial Officer and a director from 1983 to 1990. Joseph D. Rupp was elected a Corporate Vice President on January 1, 1996 and also serves as President, Brass Division. Prior to that time, since 1985, he served as Vice President, Manufacturing and Engineering for the Brass Division. 11 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters As of January 31, 1999, there were approximately 9,100 record holders of Olin Common Stock. Olin Common Stock is traded on the New York Stock Exchange, Chicago Stock Exchange and Pacific Exchange. Set forth in the Note "Other Financial Data" to the Notes to Consolidated Financial Statements in Item 8 is information concerning the high and low sales prices of Olin Common Stock and dividends paid on Olin Common Stock during each quarterly period in 1998 and 1997. Following the Spin-Off, the annual Olin dividend is expected to be $.80 per share, and the annual Arch Chemicals dividend is expected to be $.40 per equivalent Olin share ($.80 per Arch share). Initially, this would result in the same annual total dividend of $1.20 per Olin share as before the Spin-Off, although the Board of Directors of either Olin or Arch Chemicals, may change the dividend rate for that company at any time in the future. 12 Item 6. Selected Financial Data Six-Year Financial Summary
($ and shares in millions, 1998 1997 1996 1995 1994 1993 except per share data) ------ ------ ------ ------ ------ ------ Operations Sales..................... $1,426 $1,499 $1,758 $1,827 $1,620 $1,446 Cost of Goods Sold........ 1,161 1,203 1,396 1,482 1,359 1,386 Selling and Administration........... 123 132 155 153 139 135 Research and Development.. 10 8 20 17 18 21 Interest Expense.......... 17 24 27 33 27 29 Interest and Other Income (Expense)................ 7 15 13 (5) -- -- Gain (Loss) on Sales and Restructurings of Businesses and Spin- off Costs................ (63) -- 179 -- -- (26) ------ ------ ------ ------ ------ ------ Income (Loss) from Continuing Operations Before Taxes............. 59 147 352 137 77 (151) Income Tax Provision (Benefit)................ 21 50 125 47 26 (60) ------ ------ ------ ------ ------ ------ Income (Loss) from Continuing Operations.... 38 97 227 90 51 (91) Discontinued Operations... 40 56 53 50 40 (1) ------ ------ ------ ------ ------ ------ Net Income (Loss)......... 78 153 280 140 91 (92) ====== ====== ====== ====== ====== ====== Financial Position Working Capital........... 225(/1/) 273(/1/) 385(/1/) 24 88 (15) Property, Plant and Equipment, Net........... 475 517 400 580 540 534 Total Assets.............. 1,577 1,707 2,118 1,963 1,749 1,685 Capitalization: Short-Term Debt......... 1(/1/) 8(/1/) 137(/1/) 122 29 113 Long-Term Debt.......... 230(/1/) 262(/1/) 271(/1/) 406 418 449 Shareholders' Equity.... 790 879 946 841 749 596 ------ ------ ------ ------ ------ ------ Total Capitalization...... 1,021 1,149 1,354 1,369 1,196 1,158 ====== ====== ====== ====== ====== ====== Per Share Data Net Income (Loss): Basic: Continuing Operations. 0.79 1.91 4.30 1.71 0.87 (2.82) Discontinued Operations........... 0.85 1.11 1.04 1.04 0.96 (0.03) ------ ------ ------ ------ ------ ------ Net Income (Loss)..... 1.64 3.02 5.34 2.75 1.83 (2.85) ====== ====== ====== ====== ====== ====== Diluted: Continuing Operations. 0.79 1.90 4.26 1.70 0.87 (2.82) Discontinued Operations........... 0.84 1.10 1.01 0.97 0.96 (0.03) ------ ------ ------ ------ ------ ------ Net Income (Loss)..... 1.63 3.00 5.27 2.67 1.83 (2.85) ====== ====== ====== ====== ====== ====== Cash Dividends: Common.................. 1.20 1.20 1.20 1.20 1.10 1.10 ESOP Preferred (annual rate).................. -- -- 5.97 5.97 5.97 5.97 Series A Preferred (annual rate).......... -- -- -- 3.64 3.64 3.64 Shareholders' Equity(/2/). 17.25 17.98 18.13 17.03 15.43 13.62 Market Price of Common Stock: High.................... 49 5/16 51 3/8 48 38 5/8 30 1/8 25 1/4 Low..................... 23 7/8 35 3/8 34 7/8 24 1/4 23 20 Year End................ 28 5/16 46 7/8 37 5/8 37 1/8 25 3/4 24 3/4 Other Capital Expenditures...... 78 76 74 116 80 80 Depreciation.............. 76 76 84 77 78 74 Common Dividends Paid..... 58 61 60 57 44 42 Purchases of Common Stock. 112 163 -- -- -- -- Current Ratio............. 1.8 1.8 1.6 1.0 1.2 1.0 Total Debt to Total Capitalization(/3/)...... 22.6% 23.5% 30.0% 37.9% 36.5% 46.8% Effective Tax Rate........ 35.6% 34.0% 35.5% 34.3% 33.2% 40.0% Average Common Shares Outstanding.............. 47.9 50.5 50.0 47.6 41.0 38.2 Shareholders.............. 9,200 10,600 11,300 12,000 12,100 13,000 Employees(/4/)............ 6,400 6,600 6,200 7,200 7,500 7,100
- -------- In December 1996, the company sold its isocyanates business for $565 in cash. 1996 and prior include the operating results of the isocyanates business. See Management's Discussion and Analysis of Financial Condition and Results of Operations on page 14. (1) Working Capital includes $50 ($157 in 1997, $518 in 1996) of Cash and Cash Equivalents and $25 ($28 in 1997, $87 in 1996) of Short-Term Investments in 1998. (2) In 1994 and 1993, calculation is based on common shares and Series A Conversion Preferred Stock outstanding. (3) Excluding reduction to equity for the Employee Stock Ownership Plan from 1993 through 1996. (4) Employee data exclude employees who work at government-owned/contractor- operated facilities. 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated Results of Operations(/1/)
1998(/2/) 1997 1996(/3/) -------------- ---------- ----------- ($ in millions, except per share data) Sales................................ $ 1,426 $ 1,499 $ 1,758 Gross Margin......................... 265 296 362 Selling and Administration........... 123 132 155 Interest Expense, net................ 14 14 25 Gain (Loss) on Sales and Restructurings of Businesses and Spin-Off Costs...................... (63) -- 179 Income from Continuing Operations.... 38 97 227 Net Income........................... 78 153 280 Per Common Share: Basic Income from Continuing Operations...................... $ 0.79 $ 1.91 $ 4.30 Net Income....................... $ 1.64 $ 3.02 $ 5.34 Diluted Income from Continuing Operations...................... $ 0.79 $ 1.90 $ 4.26 Net Income....................... $ 1.63 $ 3.00 $ 5.27
- -------- (1)Results of operations have been restated to reflect the Spin-Off of Arch Chemicals. (2) Includes the charge for the sale of the microelectronic packaging unit at Manteca, CA and the restructuring of the rod, wire and tube businesses at Indianapolis, IN ($42 pretax, $26 after tax and $0.55 diluted earnings per share) and non-recurring costs associated with the Spin-Off of Arch Chemicals ($21 pretax, $15 after tax and $0.32 diluted earnings per share). (3) Includes the operating results of the isocyanates business, which was sold in December 1996. Sales, gross margin, selling and administration and net income of the isocyanates business in 1996 was $296, $71, $16 and $33, respectively. 1998 Compared to 1997 Sales decreased 5% due to a decrease in selling prices and lower metal values. The decrease in selling prices was primarily related to lower Electrochemical Unit ("ECU") prices in the Chlor Alkali Products segment. Gross margin percentage was 19% in 1998 compared to 20% in 1997 due to the decrease in Chlor Alkali margins as a result of lower ECU prices. Selling and Administration as a percentage of sales in 1998 and 1997 was 9%. Selling and Administration was $9 million lower than in 1997 due to lower corporate administrative expenses, primarily pension costs and management incentive compensation. Interest expense, net of interest income, was equal to 1997. Lower interest expense was due to the repayment of debt in 1997 and 1998 offset by less interest income due to lower average cash, cash equivalent and short-term investment balances. The effective tax rate increased to 35.6% from 34.0% due to lower foreign tax credits and higher non-deductible expenses related to the spin-off costs. At December 31, 1998, the Company had net deferred tax liabilities of $25 million, primarily comprised of temporary differences between financial statement and tax bases of assets and liabilities. In the third quarter of 1998, the Company recorded a $42 million pretax charge ($0.55 diluted EPS) related to the sale of the microelectronic packaging unit at Manteca, CA for $4 million in cash, and the restructuring of the rod, wire and tube businesses at Indianapolis, IN. 14 On February 8, 1999, the Company completed the Spin-Off of its specialty chemicals businesses as Arch Chemicals. Under the terms of the Spin-Off, the Company distributed to its holders of common stock of record at the close of business on February 1, 1999, one Arch Chemicals common share for every two shares of Olin common stock. The results of operations have been restated to reflect Arch Chemicals as discontinued operations for all periods presented. In the fourth quarter of 1998, the Company recorded a $21 million pretax charge ($0.32 diluted EPS) for non-recurring costs associated with the Spin- Off (primarily severance, investment banking and legal fees). 1997 Compared to 1996 In December of 1996, the Company sold its isocyanates business to ARCO Chemical Company ("ARCO") for $565 million in cash. In connection with this transaction the Company recorded a pretax gain of $188 million. The following comparison of operating results of 1997 to 1996 excludes the sales, gross margin, selling and administration expenses, research and development expenses and net income of the isocyanates businesses in 1996. On December 31, 1996, the Company completed the spin-off of its Ordnance and Aerospace businesses as Primex Technologies, Inc. ("Primex"). Under the terms of that spin-off, the Company distributed to its holders of common stock of record at the close of business on December 19, 1996, one Primex common share for every ten shares of Olin common stock. The 1996 results of operations reflect Primex as discontinued operations. In the fourth quarter of 1996, the Company recorded a $9 million pretax charge for non-recurring costs associated with the Primex spin-off (primarily pension curtailment, investment banking and legal fees). Sales increased 3% due to higher volumes and the inclusion of the sales from the Niachlor acquisition, offset in part by a drop in selling prices and metal values. Gross margin percentage was 20% in 1997 and 1996 as lower fixed costs per unit associated with higher volumes offset the impact of lower selling prices. Selling and administration expenses as a percentage of sales were 9% in 1997 and 1996. Selling and administrative expenses decreased because of lower corporate administration expenses and lower incentive compensation costs. Interest expense, net of interest income, decreased due to lower interest expense due to the repayment of the $125 million subordinated notes in 1997, and higher interest income due to higher average cash, cash equivalent and short-term investment balances in 1997. Other income decreased due to the gain on the sale of the Company's corporate headquarters in 1996. The effective tax rate decreased to 34.0% from 35.5%. Excluding the impact of the gain on the sale of the isocyanates business, the effective tax rate in 1997 increased 2.3% due to lower foreign tax benefits as a result of the sale of the isocyanates business. In February of 1997, the Company completed the purchase of the remaining 50% of Niachlor with a final payment of $2 million to E.I. du Pont de Nemours and Company (DuPont). In December 1996, the Company made an advance payment of $75 million to DuPont. In October 1997 the Company and Asahi Glass Company established separate ownership of two former joint ventures the companies had previously formed in polyols and microelectronic packaging systems. The Company became the sole owner of Aegis, Inc., a manufacturer of metal hermetic packages that was established in 1986. Conversely, Asahi Glass Company became the sole owner of the former Asahi-Olin joint venture in polyols that was established in 1974. These transactions did not have a material effect on the Company's results of operations. 15 Segment Operating Results Segment operating income is defined as earnings before interest, other income and income taxes and includes earnings of non-consolidated affiliates which is included in other income in the Consolidated Statements of Income. Segment operating income includes an allocation of corporate operating expenses. Segment operating results in 1998 exclude the charge for the sale of the microelectronic packaging unit at Manteca, CA and the restructuring of the rod, wire and tube businesses at Indianapolis, IN ($42 million pretax) and non-recurring costs associated with the Spin-Off of Arch Chemicals ($21 million pretax). Segment operating income in 1996 excludes the gain on the sale of the isocyanates business ($188 million pretax) and non-recurring costs associated with the Spin-Off of Primex ($9 million pretax). Chlor Alkali Products
1998 1997 1996 ---- ---- ---- ($ in millions) Sales...................................................... $366 $411 $397 Operating Income........................................... 55 99 86
1998 Compared to 1997 Sales were lower than 1997 due to lower pricing and lower volumes. Including the Company's share of the sales volumes from the Sunbelt joint venture, which is accounted for on an equity basis, total volumes were higher than 1997. Operating income decreased due to the lower pricing, lower operating rates, and higher manufacturing costs. Average ECU prices in 1998 were in the $340 range compared to the $360 range in 1997. Operating rates in 1998 were in the 90% range compared with 100% range in 1997. Lower operating rates were a result of lower demand for chlorine as a result of the Asian financial crisis, unusually hot weather in the southeast which caused higher electricity costs, and restricted salt availability. Manufacturing costs were higher as a result of the lower operating rates, higher depreciation and higher power costs. 1997 Compared to 1996 Sales increased due to the inclusion of the sales from Niachlor and higher volumes as a result of increased demand offset in part by lower caustic pricing. Average ECU prices in 1997 were in the $360 range compared to the $400 range in 1996. Operating income increased due to higher volumes, lower manufacturing and administrative costs and the impact of the Niachlor acquisition. Operating rates were in the 100% range in 1997 and 1996. Metals
1998 1997 1996 ---- ---- ---- ($ in millions) Sales...................................................... $799 $836 $809 Operating Income........................................... 64 62 60
1998 Compared to 1997 Sales were down 4% due to lower metal values offset in part by higher volumes. Strip volumes were up as a result of strong housing, automotive, and coinage markets. Operating income was higher due to lower administrative expenses, higher strip volumes and improved earnings at A.J. Oster Company ("Oster"). At Indianapolis, profits were lower due to higher costs in the rod, wire and tube businesses. 16 1997 Compared to 1996 Sales were 3% higher than 1996 due to higher volumes offset in part by lower metal values. Increased demand for strip products, particularly from the automotive and electronics markets, along with record specialty product shipments led to higher volumes. Operating income improved as a result of the higher volumes and improved earnings at Oster, which was partially offset by higher manufacturing costs at Indianapolis, IN. Winchester
1998 1997 1996 ---- ---- ---- ($ in millions) Sales.................................................. $261 $252 $256 Operating Income (Loss)................................ 13 (4) (2)
1998 Compared to 1997 Sales in 1998 were 4% higher than 1997 due to higher volumes offset slightly by lower prices in the centerfire rifle category. Domestic commercial volume growth was driven by improved market share in a modestly growing overall market. Domestic and international military sales were lower as were sales in Australia which has been negatively impacted by the implementation of restrictive government legislation on the sales of firearms and ammunition. Operating income improved significantly from 1997 due to the impact of the higher commercial volumes, lower manufacturing costs, lower commodity costs and lower selling and administrative expenses. In Australia, profits were lower due to the impact of the lower volumes as a result of the restrictive legislation. 1997 Compared to 1996 Sales were lower and the operating loss increased. Reduced military ammunition shipments due to the absence of a U.S. government contract along with lower commercial ammunition sales to distributors were the main contributors to the sales decrease. The profit impact from the lower volumes and increased advertising and selling expenses more than offset higher Lake City Army Ammunition facility management fees. 1999 Outlook Consolidated The Company's 1999 operating results are expected to be significantly lower than 1998. 1999 diluted earnings per share are expected to be in the $0.50 range, assuming Chlor Alkali's ECU pricing average for the year remains at approximately current levels. Chlor Alkali Products Sales and operating income are expected to decrease due to significantly lower ECU pricing. Capacity additions in the industry combined with lower demand will keep ECU pricing at depressed levels. Operating rates are expected to be in the 90% range, which is consistent with the rest of the industry. Operating results from the Sunbelt joint venture will be lower due to the lower ECU pricing. Metals Sales are expected to increase slightly due to higher strip volumes and higher metal values which will more than offset the loss of revenue associated with the rod, wire and tube businesses which were shut down at the end of 1998. Over capacity in the industry and strong competition will keep pricing relatively flat. Operating income is expected to improve due to the cost benefits of the shutdown of the rod, wire and tube businesses, higher volumes and other cost reduction initiatives. 17 Winchester Sales are expected to be higher due to an increase in domestic commercial channels. Operating income is expected to be higher because of the higher sales. Cautionary Statement under Federal Securities Laws: The information contained in the 1999 Outlook section (and subsections thereof), the Environmental Matters section, the Liquidity, Investment Activity and Other Financial Data section, and the Environmental and Commitments and Contingencies notes to the Consolidated Financial Statements contains forward- looking statements that are based on management's beliefs, certain assumptions made by management and current expectations, estimates and projections about the markets and economy in which the Company and its various divisions operate. Words such as "expects," "believes," "should," "plans," "will," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Future Factors") which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expected or forecasted in such forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise. Future Factors which could cause actual results to differ materially from those discussed in these sections and notes include but are not limited to: general economic and business and market conditions; lack of moderate growth in the U.S. economy or even a slight recession in 1999; worsening business conditions as a result of the Asian and Latin American financial turmoil; competitive pricing pressures; declines in Chlor Alkali's ECU prices below those projected; Chlor Alkali operating rates below the 90% range; higher-than-expected raw material costs; a downturn in many of the markets the Company serves such as the electronics, automotive, ammunition and housing; the supply/demand balance for the Company's products, including the impact of excess industry capacity; failure to achieve targeted cost reduction programs; capital expenditures, such as cost overruns, in excess of those scheduled; environmental costs in excess of those projected; and the occurrence of unexpected manufacturing interruptions/outages. Discontinued Operations
1998 1997 1996 ---- ---- ------ ($ in millions) Sales.................................................... $863 $930 $1,385 Net Income............................................... 40 56 53
1998 Compared to 1997 Sales decreased 7% due to a decrease in prices and lower volumes due to the sale of the surfactants business in 1997 and the conversion of the flexible polyol business to a tolling operation. Net income decreased due to the lower volumes and higher selling and administrative expenses. Selling and administrative expenses were higher due to an increase in information technology spending related to the SAP implementation and increased international operating expenses. 1997 Compared to 1996 Operating results in 1996 include Primex which was spun-off in December 1996. Primex sales were $471 million with a net loss of $8 million in 1996. Excluding Primex, the sales of the discontinued operations increased 2% while net income decreased 8%. The sales increase was attributable to a 1% increase in both prices and volumes. Net income decreased due to lower gross margins as a result of higher raw material and manufacturing costs offset in part by lower selling and administrative expenses. 18 Environmental Matters
1998 1997 1996 ---- ---- ---- ($ in millions) Cash Outlays: Remedial and Investigatory Spending.................. $20 $31 $30 Capital Spending..................................... 2 2 3 Plant Operations..................................... 17 15 16 --- --- --- Total Cash Outlays..................................... $39 $48 $49 === === ===
The establishment and implementation of federal, state and local standards to regulate air, water and land quality 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, particularly the chemicals industry. In addition, implementation of environmental laws, such as the Resource Conservation and Recovery Act and the Clean Air Act, has required and will continue to require new capital expenditures and will increase operating costs. The Company employs waste minimization and pollution prevention programs at its manufacturing sites. The Company is party to various governmental and private environmental actions associated with waste disposal sites and manufacturing facilities. 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 material to operating results in 1998, 1997, and 1996 and may be material to net income in future years. Such charges to income were $16 million, $17 million and $70 million in 1998, 1997, and 1996 respectively. In 1996, in connection with the sale of the isocyanates business at the Company's Lake Charles, LA facility, a $53 million provision was recorded to provide for contractual liabilities related to future environmental spending at the Lake Charles site. Cash outlays for remedial and investigatory activities associated with former waste sites and past operations were not charged to income but instead were charged to reserves established for such costs identified and expensed to income in prior years. 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. 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 estimated environmental liability at the end of 1998 was attributable to 51 sites, 16 of which were on the National Priority List (NPL). Ten sites accounted for approximately 79% of such liability and, of the remaining sites, no one site accounted for more than 2% of such liability. Two of these ten sites were in the investigatory stage of the remediation process. In this stage, remedial investigation and feasibility studies are conducted by either the Company, the United States Environmental Protection Agency (EPA) or other potentially responsible parties (PRPs) and a Record of Decision (ROD) or its equivalent has not been issued. At six of the ten sites, a ROD or its equivalent has been issued by either the EPA or responsible state agency and the Company either alone, or as a member of a PRP group, was engaged in performing the remedial measures required by that ROD. At the remaining two of the ten sites, part of the site is subject to a ROD and another part is still in the investigative stage of remediation. All ten sites were either former manufacturing facilities or waste sites containing contamination generated by those facilities. The Company's consolidated balance sheets included liabilities for future environmental expenditures to investigate and remediate known sites amounting to $129 million at December 31, 1998 and $133 million at December 31, 1997, of which $99 million and $103 million were classified as 19 other noncurrent liabilities, respectively. Those amounts did not take into account any discounting of future expenditures or any consideration of insurance recoveries or advances in technology. Those liabilities are reassessed periodically to determine if environmental circumstances have changed and/or remediation efforts and their costs 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 1999 are estimated to be $54 million, of which $30 million is expected to be spent on investigatory and remedial efforts, $7 million on capital projects and $17 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 $50-$60 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. It is possible that some of these matters (the outcomes of which are subject to various uncertainties) may be resolved unfavorably against the Company. At December 31, 1998, the Company had estimated additional contingent environmental liabilities of $40 million. Liquidity, Investment Activity and Other Financial Data Cash Flow Data
Provided By (Used For) 1998 1997 1996 ---------------------- ----- ----- ---- ($ in millions) Net Cash and Cash Equivalents Provided by (Used for) Operating Activities from Continuing Operations............... $ 178 $ (33) $178 Net Operating Activities............................... 180 (12) 223 Capital Expenditures................................... (78) (76) (74) Net Investing Activities............................... (78) (4) 324 Purchases of Olin Common Stock......................... (112) (163) -- Net Financing Activities............................... (209) (345) (31)
Cash flows from operations and cash and cash equivalents on hand were used to finance the Company's working capital requirements, long-term debt payments, capital and investment projects, dividends and the purchase of the Company's common stock. Operating Activities In 1998, the increase in cash flow from operating activities of continuing operations was primarily attributable to lower investment in working capital and lower tax payments. In 1997, the Company paid approximately $110 million of taxes related to the sale of the isocyanates business. In 1998 the Company received approximately $80 million as a result of a refund of taxes paid on capital gains in prior years. In 1997, the decrease in cash flow from operating activities of continuing operations was due to lower earnings (due to the sale of the isocyanates business in 1996), taxes paid on the sale of the 20 isocyanates business and increased investment in working capital. The discontinuation of an ammunition prepayment program in 1997 and unusually low accounts receivable levels in the metals segment at year-end 1996 contributed to the investment in working capital in 1997. Capital Expenditures Capital spending of $78 million in 1998 was $2 million higher than 1997 and approximated depreciation in both years. Excluding the capital spending ($10 million) and depreciation ($22 million) associated with the isocyanates business in 1996, capital spending in 1996 was slightly higher than depreciation because of capital spending in support of the Brass Mill 2000 project. Investing Activities In 1998, the Company sold its microelectronic packaging unit at Manteca, CA, for $4 million in cash. In February 1997, the Company completed its purchase of the remaining 50% of Niachlor with a final payment of $2 million to E.I. du Pont de Nemours and Company (DuPont). In December 1996, the Company made an advance payment of $75 million to DuPont, which was included in Investment and Advances-Affiliated Companies at Equity in the December 31, 1996 Balance Sheet. This acquisition was accounted for as a purchase in 1997 and consists primarily of property, plant and equipment. In October 1997 the Company and Asahi Glass Company established separate ownership of two former joint ventures the companies had previously formed in polyols and microelectronic packaging systems. The Company became the sole owner of Aegis, Inc., a manufacturer of metal hermetic packages that was established in 1986. Conversely, Asahi Glass Company became the sole owner of the Asahi-Olin joint venture in polyols that was established in 1974. The net proceeds of this transaction were $5 million and did not have a material effect on the Company's results of operations. Investment spending in 1997 was primarily attributable to the Sunbelt project, a joint venture formed by the Geon Company and the Company in 1996 to construct and operate a Chlor Alkali facility at the Company's McIntosh, AL site. The facility started operations in December 1997. Also in December, the Company was repaid $98 million of its original advances to the venture, as a result of a long-term financing undertaken by this venture. The Company has guaranteed its share of the venture's long-term debt. In 1996, the Company invested approximately $27 million in this venture. In December 1996, the Company sold its isocyanates business for $565 million in cash. The sale included all assets at the Company's Lake Charles, LA facility used in the manufacture and sale of toluene diisocyanate, aliphatic isocyanates and nitric acid. Proceeds of $23 million in 1996 from the disposition of property, plant and equipment related primarily to the sale of the corporate headquarters. Financing Activities At December 31, 1998, the Company maintained committed credit facilities with banks of $254 million, all of which were available. Included in the $254 million committed credit facility is an unsecured revolving credit agreement with a group of banks which provided a maximum borrowing of $250 million. During 1997, the Company amended the revolving credit agreement, extending the expiration date to October 2002. As a result of the Spin-Off of Arch Chemicals, in February of 1999, the Company amended the revolving credit agreement reducing the aggregate commitments from $250 million to $165 million. The Company may select various floating rate borrowing options. The Company believes that the credit facility is adequate to satisfy its liquidity needs for the near future. 21 The credit facility includes various customary restrictive covenants including restrictions related to the ratio of debt to earnings before interest, taxes, depreciation and amortization and the ratio of earnings before interest, taxes, depreciation and amortization to interest. In May 1998, the Company repaid $38 million of 7.97% notes. In June 1997, the Company repaid $125 million of 9.5% subordinated notes. During 1998 and 1997, the Company used $112 million and $163 million to repurchase 3.1 and 3.8 million shares of the Company's stock, respectively. The Board of Directors has approved two share repurchase programs to repurchase 10 million shares of the Company's stock. It is expected that this program will be completed during 1999. Prior to the Spin-Off of Arch Chemicals in February, 1999, the Company borrowed $75 million under a credit facility which liability was assumed by Arch Chemicals. The Company intends to use these funds for general corporate purposes, which may include share repurchases and future acquisitions. Prior to being spun-off from the Company, Primex assumed a $160 million credit facility established by the Company, under which the Company had borrowed $125 million. The Company used these funds to reduce its own borrowings in 1997. The percent of total debt to total capitalization (excluding the reduction in equity for the Contributing Employee Ownership Plan (ESOP)) decreased to 23% at December 31, 1998, from 24% at year-end 1997 and 30% at year-end 1996. Contributing to the decrease in 1997 was the repayment of the 9.5% subordinated notes. In 1989 the Company established an ESOP. The ESOP trust borrowed $100 million ($40 million from the Company) to purchase 1.3 million shares of the Company's convertible preferred stock. The ESOP trust has repaid in full its original loan from the Company. This loan to the ESOP was financed by the Company through a long-term credit facility and was repaid in July 1996. In December 1996, the Board of Directors approved the redemption of all outstanding ESOP preferred stock with common stock of equivalent value. Approximately 1.87 million shares of common stock at a per share value of $40.19 were issued in exchange for approximately .9 million shares of ESOP preferred stock at a per share value of $85.75. The annual fixed dividend rate was $5.97 per share and during 1996, dividends were paid in the first three quarters. Dividends per common share were $1.20 in 1998, 1997 and 1996. Total dividends paid on common stock amounted to $58 million in 1998, $61 million in 1997 and $60 million in 1996, while ESOP preferred dividends amounted to $4 million in 1996. The Company will pay a first quarter 1999 dividend of $0.30 per share on March 10, 1999 to shareholders of record on January 19, 1999. Following the Spin-Off of Arch Chemicals, the annual Olin dividend is expected to be $0.80 per share to reflect the effect of the Spin-Off. The annual Arch Chemicals dividend is expected to be $0.40 per equivalent Olin common share ($0.80 per Arch Chemicals common share). Initially, this would result in the same annual total dividend of $1.20 per Olin share, although the Board of Directors of either Olin or Arch Chemicals could change the dividend rate for that company at any time in the future. During 1992, the Company swapped interest payments on $50 million principal amount of its 8% notes due 2002, to a floating rate (5.15602% at December 31, 1998). In June 1995, the Company offset this transaction by swapping interest payments to a fixed rate of 6.485%. New Accounting Standards In 1998 the Company adopted SFAS No 130, "Reporting Comprehensive Income," which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. 22 In 1998 the Company adopted 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. In 1998, the Company adopted SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits, an amendment to FASB Statements No. 87, 88, and 106," which modifies the disclosure requirements related to pensions and other postretirement benefits. 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. After determining the effect of Statement 133, the Company may consider early adoption of this pronouncement. 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, but does not believe it will have a material effect. 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. Euro Conversion On January 1, 1999, eleven of the fifteen member countries of the European Union adopted the Euro as their common legal currency and established fixed conversion rates between their existing sovereign currencies and the Euro. The Company does not expect the conversion to the Euro to have a material impact on its business, operations, or financial position. Derivative Financial Instruments The Company enters into forward sales and purchase contracts and currency options to manage currency risk resulting from purchase and sale commitments denominated in foreign currencies (principally Australian dollar and Canadian dollar) and relating to particular anticipated but not yet committed purchases and sales expected to be denominated in those currencies. All of the currency derivatives expire within one year and are for United States dollar equivalents. At December 31, 1998, the Company had forward contracts to sell foreign currencies with face values of $4 million (1997-$1 million) and forward contracts to buy foreign currencies with face values of $1 million in 1997. The fair market value of the forward contracts to sell at December 31, 1998 and 1997 and the forward contracts to buy at December 31, 1997 approximated the carrying value. The Company had no outstanding option contracts at December 31, 1998 and 1997. 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 23 as, and is effective as, a hedge of a foreign currency commitment and the foreign currency commitment is firm. A hedge is considered by the Company to be effective when the transaction reduces the currency risk on its foreign currency commitments. If a transaction does not meet the criteria to qualify as a hedge, it is considered to be speculative. For a foreign currency commitment that is classified as a hedge, any gain or loss on the commitment is deferred and included in the basis of the underlying instrument. Any realized and unrealized gains or losses associated with foreign currency commitments that are classified as speculative are recognized in the current period and are included in Selling and Administration in the consolidated statements of income. If a foreign currency transaction previously considered as a hedge is terminated before the transaction date of the related commitment, any deferred gain or loss shall continue to be deferred and included in the basis of the underlying investment. Premiums paid for currency options and gains or losses on forward sales and purchase contracts are not material to operating results. Depending on market conditions, the Company may enter into futures contracts and put and call option contracts in order to reduce the impact of metal price fluctuations, principally in copper, lead and zinc. In accordance with SFAS No. 80, "Accounting for Futures Contracts," futures contracts are classified as a hedge when the item to be hedged exposes the Company to price risk and the futures contract reduces that risk exposure. Futures contracts that relate to transactions that are expected to occur are accounted for as a hedge when the significant characteristics and expected terms of the anticipated transaction are identified and it is probable that the anticipated transaction will occur. If a transaction does not meet the criteria to qualify as a hedge, it is considered to be speculative. Any gains or losses associated with futures contracts which are classified as speculative are recognized in the current period. If a futures contract that has been accounted for as a hedge is closed or matures before the date of the anticipated transaction, the accumulated change in value of the contract is carried forward and included in the measurement of the related transaction. Option contracts are accounted for in the same manner that futures contracts are accounted for. 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 segment 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 segment 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 segment and corporate levels with periodic assessments made by independent parties which are reported to the Board. As a result of the Spin-Off of Arch Chemicals, the Company entered into an information technology services agreement with Arch Chemicals stipulating that Arch Chemicals will provide various technology related services including maintenance of the centralized computer center and the wide area network as well as provide services in support of the Company's Year 2000 initiative. 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. 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 areas: 1) Business Systems; 2) Manufacturing; 3) Supply Chain; and 4) Infrastructure. In the business systems area, 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. In 1993, the Company began implementing for all domestic businesses, except the Metals segment, a client- server system, SAP, for core business requirements as a vehicle to obtain certain improvements in the business processes. With the 24 exception of the Metals segment, 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 (except Metals) transferred to SAP. In the few instances where SAP is not utilized, replacement systems are scheduled for June 1999. Offshore processing systems will continue using existing systems. All systems have been examined with Year 2000 upgrades targeted for completion by the second quarter of 1999. The Metals segment is addressing the Year 2000 issue by converting existing programs to be compliant. It has completed code converting its entire software portfolio, and is currently heavily engaged in the testing phase of its plan. Completion of all systems is targeted for June 1999. In the manufacturing area, 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. Sixteen items, which have the potential for causing process shutdowns or unsafe conditions, remain to be remediated or replaced. The plan, which takes maximum advantage of "planned outages" in order to minimize the impact on operations, targets completion by May 1999. The supply chain area has seen much activity in terms of assessing vendor Year 2000 preparedness, identifying alternate sources, as well as insertion of certain Year 2000 compliance language in all purchase orders issued. The Company has completed a review of single source and critical suppliers. During 1999, the Company will continue to re-evaluate its suppliers on a periodic basis. Personal computers, networks, and PBX's represent the majority of items in the Company's infrastructure area. The Company has deployed new Pentium Year 2000 compliant equipment in large numbers to support its SAP deployment program and for internal standards compliance. In addition, the Company is currently utilizing software tools to test the entire PC inventory for Year 2000 compliance and this is expected to be completed by the first quarter of 1999. The Company's wide area network is already Year 2000 compliant as is most of its PBX and voice mail systems. The non-compliant equipment is planned to be replaced with compliant versions as leases expire, but no later than June 1999. The Company believes its Year 2000 initiative is on track to address all significant Year 2000 issues by the middle of 1999, and is supported by the findings of an independent assessment completed in December 1998. Plans include additional assessments throughout 1999. Plans for a worst case scenario in the unlikely event of a major failure due to a Year 2000 problem which causes significant disruptions to business operations have been formulated. In the area of business systems, management believes that the Company, with most of its operating units already migrated to Year 2000 compliant solutions, has already significantly reduced its potential risk. As added protection, software migration plans to new releases of SAP and Peoplesoft, which are planned in 1999, include Year 2000 testing scenarios. The Company 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 on the manufacturing area. 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 areas, and take corrective action should slippage 25 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, 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 $5 million inclusive of the cost for deploying SAP and Peoplesoft and related infrastructure over the next 12 months. The dates on which the Company believes the Year 2000 Project will be completed and the SAP computer systems will be implemented are based on management's best estimates, which are derived utilizing numerous assumptions of future events, including the continued availability of certain resources, third-party modification plans and other factors. However, there can be no guarantee that these estimates will be achieved, or that there will not be a delay in, or increased costs associated with, the implementation of the Year 2000 Project. Specific factors that might cause differences between the estimates and actual results include, but are not limited to, the availability and cost of personnel trained in these areas, the ability to locate and correct all relevant computer codes, timely responses to and corrections by third-parties and suppliers, the ability to implement interfaces between the new systems and the systems not being replaced, and similar uncertainties. Due to the general uncertainty inherent in the Year 2000 problem, resulting in part from the uncertainty of the Year 2000 readiness of third parties and the interconnection of global businesses, the Company cannot ensure its ability to timely and cost-effectively resolve the problems associated with the Year 2000 issue that may affect its operations and business, or expose it to third-party liability. Risk Management The Company periodically evaluates risk retention and insurance levels for product liability, property damage and other potential areas of risk. Based on the cost and availability of insurance and the likelihood of a loss occurring, management decides the amount of insurance coverage to purchase from unaffiliated companies and the appropriate amount of risk to retain. The current levels of risk retention are believed to be appropriate and are consistent with those of other companies in the various industries in which the Company operates. Item 7A. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to market risk in the normal course of its business operations due to its operations in different foreign currencies, its purchases of certain commodities, and its ongoing investing and financing activities. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. The Company has established policies and procedures governing its management of market risks and the use of financial instruments to manage exposure to such risks. The primary purpose of the Company's foreign currency hedging activities is to manage currency risk resulting from purchase and sale commitments denominated in foreign currencies (principally Australian dollar and Canadian dollar) and relating to particular anticipated purchases and sales expected to be denominated in those same foreign currencies. Foreign currency hedging activity is not material to the Company's consolidated financial position, results of operations, or cash flow. Certain raw materials, namely copper, lead, and zinc used primarily in the Company's Metals and Winchester segments products are subject to price volatility. Depending on market conditions, the Company may enter into futures contracts and put and call option contracts in order to reduce the 26 impact of metal price fluctuations. As of December 31, 1998, the Company maintained open positions on futures contracts totalling $44 million. Assuming a hypothetical 10% increase in commodity prices which are currently hedged, the Company would experience a $4.4 million increase in its cost of inventory purchased, which would be offset by a corresponding increase in the value of related hedging instruments. The Company is exposed to changes in interest rates primarily as a result of its investing and financing activities. Investing activity is not material to the Company's consolidated financial position, results of operations, or cash flow. The financing activities of the Company are comprised primarily of long- term fixed rate debt utilized to fund business operations and maintain liquidity. As of December 31, 1998, the Company had long-term borrowings of $230 million outstanding at varying fixed rates. Assuming a decrease of 100 basis points in the interest rate for borrowings of a similar nature which the Company becomes unable to capitalize on in the short-term as a result of the structure of its fixed rate financings, future cash flows would be affected by approximately $2.3 million. The Company has interest rate swaps to hedge underlying debt obligations. Interest rate swap activity is not material to the Company's consolidated financial position, results of operations, or cash flow. If the actual change in interest rates or commodities pricing is substantially different than expected, the net impact of interest rate risk or commodity risk on the Company's cash flow may be materially different than that disclosed above. The Company does not enter into any derivative financial instruments for trading purposes. 27 Item 8. Consolidated Financial Statements and Supplementary Data Management Report on Financial Statements Management is responsible for the preparation and integrity of the accompanying consolidated financial statements. These financial statements have been prepared in conformity with generally accepted accounting principles and, where necessary, involve amounts based on management's best judgments and estimates. Management also prepared the other information in this annual report and is responsible for its accuracy and consistency with the financial statements. The Company's system of internal controls is designated to provide reasonable assurance as to the integrity and reliability of the financial statements, the protection of assets from unauthorized use or disposition, and the prevention and detection of fraudulent financial reporting. This system, which is reviewed regularly, consists of written policies and procedures, an organizational structure providing delegation of authority and segregation of responsibility and is monitored by an internal audit department. The Company's independent auditors also review and test the internal control system along with tests of accounting procedures and records to the extent that they consider necessary in order to issue their opinion on the financial statements. Management believes that the system of internal accounting controls meets the objectives noted above. Management also recognizes its responsibility for fostering a strong ethical climate so that the Company's affairs are conducted according to the highest standards of personal and corporate conduct. This responsibility is communicated to all employees in a variety of ways, including personal training sessions. The Ethics Program is based upon a document called "The Standards of Ethical Business Practices." The standards address, among other things, the necessity of ensuring open communication within the Company; potential conflicts of interest; compliance with all domestic and foreign laws, including those relating to financial disclosure; and the confidentiality of proprietary information. The Company maintains a systematic program to assess compliance with these standards and has established confidential ways, including a confidential telephone help-line (1-800-362-8348), for employees and suppliers to ask questions and share concerns. The Audit Committee of the Board of Directors, composed solely of outside directors, meets periodically with the independent auditors, management and the Company's internal auditors to review the work of each and to evaluate accounting, auditing, internal controls and financial reporting matters. The Audit Committee annually recommends to the Board of Directors the appointment of independent auditors, subject to shareholder approval. The independent auditors and the Company's internal audit department have independent and free access to the Audit Committee. /s/ Donald W. Griffin /s/ Anthony W. Rugglero Donald W. Griffin Anthony W. Ruggiero Chairman, Executive Vice President and President and Chief Financial Officer Chief Executive Officer 28 Independent Auditors' Report To the Board of Directors and Shareholders of Olin Corporation We have audited the accompanying consolidated balance sheets of Olin Corporation and subsidiaries as of December 31, 1998 and 1997 and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements, referred to above, present fairly, in all material respects, the financial position of Olin Corporation and subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the years in the three- year period ended December 31, 1998 in conformity with generally accepted accounting principles. /s/ KPMG LLP Stamford, Connecticut January 26, 1999 29 Consolidated Balance Sheets December 31 ($ in millions except share data)
1998 1997 ------ ------ Assets Current Assets: Cash and Cash Equivalents.................................... $ 50 $ 157 Short-Term Investments....................................... 25 28 Receivables, Net: Trade...................................................... 162 166 Other...................................................... 30 23 Inventories, Net of LIFO Reserve of $63 ($86 in 1997)........ 199 208 Income Taxes Receivable...................................... 33 -- Other Current Assets......................................... 18 20 ------ ------ Total Current Assets....................................... 517 602 Investments and Advances--Affiliated Companies at Equity....... 12 10 Property, Plant and Equipment, Net............................. 475 517 Other Assets................................................... 68 122 Net Assets of Discontinued Operations.......................... 505 456 ------ ------ Total Assets................................................... $1,577 $1,707 ====== ====== Liabilities and Shareholders' Equity Current Liabilities: Current Installments of Long-Term Debt....................... $ 1 $ 8 Accounts Payable............................................. 118 137 Income Taxes Payable......................................... 5 5 Accrued Liabilities.......................................... 168 179 ------ ------ Total Current Liabilities.................................. 292 329 Long-Term Debt................................................. 230 262 Other Liabilities.............................................. 265 237 ------ ------ Total Liabilities.......................................... 787 828 ------ ------ Commitments and Contingencies Shareholders' Equity: Common Stock, Par Value $1 Per Share: Authorized, 120,000,000 Shares Issued and Outstanding 45,922,864 Shares (48,840,234 in 1997)..................................................... 46 49 Additional Paid-In Capital................................... 243 348 Accumulated Other Comprehensive Loss......................... (25) (24) Retained Earnings............................................ 526 506 ------ ------ Total Shareholders' Equity................................. 790 879 ------ ------ Total Liabilities and Shareholders' Equity..................... $1,577 $1,707 ====== ======
The accompanying Notes to Financial Statements are an integral part of the financial statements. 30 Consolidated Statements of Income Years ended December 31 ($ in millions, except per share data)
1998 1997 1996 ------ ------ ------ Sales..................................................... $1,426 $1,499 $1,758 Operating Expenses: Cost of Goods Sold...................................... 1,161 1,203 1,396 Selling and Administration.............................. 123 132 155 Research and Development................................ 10 8 20 Interest Expense.......................................... 17 24 27 Interest Income........................................... 3 10 2 Other Income.............................................. 4 5 11 Gain (Loss) on Sales and Restructurings of Businesses and Spin-off Costs....................................... (63) -- 179 ------ ------ ------ Income from Continuing Operations Before Taxes............ 59 147 352 Income Taxes.............................................. 21 50 125 ------ ------ ------ Income from Continuing Operations......................... 38 97 227 Income from Discontinued Operations, Net of Taxes......... 40 56 53 ------ ------ ------ Net Income................................................ 78 153 280 Preferred Dividends....................................... -- -- 4 ------ ------ ------ Net Income Available to Common Shareholders............... $ 78 $ 153 $ 276 ====== ====== ====== Net Income Per Common Share: Basic: Continuing Operations................................... $ 0.79 $ 1.91 $ 4.30 Discontinued Operations................................. 0.85 1.11 1.04 ------ ------ ------ Total Net Income...................................... $ 1.64 $ 3.02 $ 5.34 ====== ====== ====== Diluted: Continuing Operations................................... $ 0.79 $ 1.90 $ 4.26 Discontinued Operations................................. 0.84 1.10 1.01 ------ ------ ------ Total Net Income...................................... $ 1.63 $ 3.00 $ 5.27 ====== ====== ======
The accompanying Notes to Financial Statements are an integral part of the financial statements. 31 Consolidated Statements of Shareholders' Equity ($ in millions, except share data)
Common Stock Accumulated ESOP ----------------- Additional Other Preferred Total Shares Par Paid-In Comprehensive Retained Stock Par ESOP Shareholders' Issued Value Capital Loss Earnings Value Obligations Equity ---------- ----- ---------- ------------- -------- --------- ----------- ------------- Balance at January 1, 1996................... 49,418,410 $49 $ 398 $ (4) $ 343 $ 77 $(22) $ 841 Comprehensive Income: Net Income............. -- -- -- -- 280 -- -- 280 Translation Adjustment. -- -- -- (5) -- -- -- (5) Comprehensive Income... -- -- -- -- -- -- -- 275 Dividends Paid: Common Stock ($1.20 per share)................ -- -- -- -- (60) -- -- (60) ESOP Preferred Stock ($5.97 per share)..... -- -- -- -- (4) -- -- (4) Issuance of ESOP Preferred Stock........ -- -- -- -- -- 9 -- 9 Redemption of ESOP Preferred Stock........ 2,343,401 2 84 -- -- (86) -- -- Spin-off of Primex Technologies, Inc...... -- -- -- -- (145) -- -- (145) Reduction in ESOP Obligations............ -- -- -- -- -- -- 17 17 Stock Options Exercised. 347,232 1 10 -- -- -- -- 11 Other Transactions...... 93,716 -- 2 -- -- -- -- 2 ---------- --- ----- ---- ----- ---- ---- ----- Balance at December 31, 1996................... 52,202,759 52 494 (9) 414 -- (5) 946 Comprehensive Income: Net Income............. -- -- -- -- 153 -- -- 153 Translation Adjustment. -- -- -- (15) -- -- -- (15) Comprehensive Income... -- -- -- -- -- -- -- 138 Dividends Paid: Common Stock ($1.20 per share)................ -- -- -- -- (61) -- -- (61) Reduction in ESOP Obligations............ -- -- -- -- -- -- 5 5 Stock Options Exercised. 413,258 -- 13 -- -- -- -- 13 Stock Repurchase........ (3,827,100) (3) (160) -- -- -- -- (163) Other Transactions...... 51,317 -- 1 -- -- -- -- 1 ---------- --- ----- ---- ----- ---- ---- ----- Balance at December 31, 1997................... 48,840,234 49 348 (24) 506 -- -- 879 Comprehensive Income: Net Income............. -- -- -- -- 78 -- -- 78 Translation Adjustment. -- -- -- 1 -- -- -- 1 Minimum Pension Liability Adjustment.. -- -- -- (2) -- -- -- (2) Comprehensive Income... -- -- -- -- -- -- -- 77 Dividends Paid: Common Stock ($1.20 per share)................ -- -- -- -- (58) -- -- (58) Stock Options Exercised. 84,528 -- 3 -- -- -- -- 3 Stock Repurchase........ (3,096,100) (3) (109) -- -- -- -- (112) Other Transactions...... 94,202 -- 1 -- -- -- -- 1 ---------- --- ----- ---- ----- ---- ---- ----- Balance at December 31, 1998................... 45,922,864 $46 $ 243 $(25) $ 526 $ -- $ -- $ 790 ========== === ===== ==== ===== ==== ==== =====
The accompanying Notes to Financial Statements are an integral part of the financial statements. 32 Consolidated Statements of Cash Flows Years ended December 31 ($ in millions)
1998 1997 1996 ----- ---- ---- Operating Activities Income from Continuing Operations.......................... $ 38 $ 97 $227 Adjustments to Reconcile Income from Continuing Operations to Net Cash and Cash Equivalents Provided by Operating Activities: Earnings of Non-consolidated Affiliates.................. -- (1) (2) Depreciation............................................. 76 76 84 Amortization of Intangibles.............................. 2 2 2 Deferred Taxes........................................... 104 41 (78) Loss (Gain) on Sales and Restructurings of Businesses and Spin-off Costs......................................... 63 -- (188) Change in Assets and Liabilities Net of Purchases and Sales of Businesses: Receivables............................................ (5) (19) 26 Inventories............................................ 7 (14) 18 Other Current Assets................................... 4 (5) 3 Accounts Payable and Accrued Liabilities............... (57) (45) (38) Income Taxes Payable................................... (33) (122) 122 Other Noncurrent Liabilities........................... (8) (36) (11) Other Operating Activities............................... (13) (7) 13 ----- ---- ---- Net Cash and Cash Equivalents Provided by Operating Activities from Continuing Operations..................... 178 (33) 178 Discontinued Operations: Net Income................................................ 40 56 53 Change in Net Assets...................................... (38) (35) (8) ----- ---- ---- Net Operating Activities............................... 180 (12) 223 ----- ---- ---- Investing Activities Capital Expenditures....................................... (78) (76) (74) Disposition of Property, Plant and Equipment............... -- -- 23 Business Acquired in Purchase Transactions................. -- (2) -- Proceeds from Sales of Businesses.......................... 4 5 565 Purchases of Short-Term Investments........................ (25) (126) (87) Proceeds from Sale of Short-Term Investments............... 28 185 -- Investments and Advances--Affiliated Companies at Equity... (3) (84) (103) Repayments of Advances From a Joint Venture................ -- 98 -- Other Investing Activities................................. (4) (4) -- ----- ---- ---- Net Investing Activities............................... (78) (4) 324 ----- ---- ---- Financing Activities Long-Term Debt Repayments.................................. (39) (137) (62) Short-Term Debt Repayments................................. -- -- (58) Borrowings under Line of Credit Assumed by Primex Technologies, Inc........................................ -- -- 125 Purchase of Olin Common Stock.............................. (112) (163) -- Repayment from ESOP........................................ -- 5 17 Stock Options Exercised.................................... 3 13 11 Dividends Paid............................................. (58) (61) (64) Other Financing Activities................................. (3) (2) -- ----- ---- ---- Net Financing Activities............................... (209) (345) (31) ----- ---- ---- Net (Decrease) Increase in Cash and Cash Equivalents... (107) (361) 516 Cash and Cash Equivalents, Beginning of Year............... 157 518 2 ----- ---- ---- Cash and Cash Equivalents, End of Year................. $ 50 $157 $518 ===== ==== ==== Cash Paid (Received) for Interest and Income Taxes: Interest $ 17 $ 27 $ 40 Income Taxes, Net of Refunds............................. $ (31) $166 $104 ===== ==== ====
The accompanying Notes to Financial Statements are an integral part of the financial statements. 33 Notes to Financial Statements ($ in millions, except share data) Accounting Policies The preparation of the consolidated financial statements requires estimates and assumptions that affect amounts reported and disclosed in the financial statements and related notes. Actual results could differ from those estimates. Certain reclassifications were made to prior year amounts to conform with the 1998 presentation. In addition, the financial statements have been restated to reflect Arch Chemicals, Inc. ("Arch Chemicals") as a discontinued operation as a result of its spin-off which occurred on February 8, 1999. Basis of Presentation The consolidated financial statements include the accounts of Olin Corporation ("Olin" or "Company") and all majority-owned subsidiaries. Investments in 20-50% owned affiliates are accounted for on the equity method. Accordingly, the Company's share of earnings or losses of these affiliates is included in consolidated net income. Foreign Currency Translation Foreign affiliates' balance sheet amounts are translated at the exchange rates in effect at year-end, and income statement amounts are translated at the average rates of exchange prevailing during the year. Translation adjustments are included in Accumulated Other Comprehensive Loss. Where foreign affiliates operate in highly inflationary economies non-monetary amounts are translated at historical exchange rates while monetary assets and liabilities are translated at the current rate with the related adjustments reflected in the Consolidated Statements of Income. 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. Short-Term Investments Marketable debt securities are accounted for in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Accordingly, the Company has classified its marketable debt securities as available-for-sale which are reported at fair market value with unrealized gains and losses included in Shareholders' Equity net of applicable taxes. The fair value of marketable securities is determined by quoted market prices. Unrealized gains and losses in 1998 and 1997 were insignificant. Realized gains and losses on sales of investments, as determined on the specific identification method and declines in value of securities judged to be other-than-temporary are included in Other Income in the Consolidated Statements of Income. Interest and dividends on all securities are included in Interest Income and Other Income, respectively. All investments which have original maturities between three and twelve months are considered short-term investments and consist of debt securities such as commercial paper, time deposits, certificates of deposit, bankers acceptances, repurchase agreements, and marketable direct obligations of the United States Treasury. Inventories Inventories are valued principally by the dollar value last-in, first-out (LIFO) method of inventory accounting; in aggregate, such valuations are not in excess of market. Cost for other inventories have 34 been determined principally by the average-cost and first-in, first out (FIFO) methods. 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 estimated useful lives of the related assets. Leasehold improvements are amortized over the term of the lease or the estimated useful life of the improvement, whichever is shorter. 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. Accumulated Other Comprehensive Loss at December 31, 1998 includes cumulative translation adjustments of $23 ($24 at December 31, 1997) and $2 of minimum pension liability. 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. 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 expected future operating cash flows in relation to the book value of the goodwill and related long-lived assets. An impairment would be recorded based on the estimated fair value. 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 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 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 Australian dollar and Canadian dollar) and relating to particular anticipated but not yet committed purchases and sales expected to be denominated in those currencies. All of the currency derivatives expire within one year and are for United States dollar equivalents. At December 31, 1998, 35 the Company had forward contracts to sell foreign currencies with face values of $4 (1997-$1) and no forward contracts to buy (1997-$1). The fair market value of the forward contracts to sell was $4 and $1 at December 31, 1998 and 1997, respectively. The fair market value of the forward contracts to buy was $1 at December 31, 1997. The Company had no outstanding option contracts at December 31, 1998 and 1997. 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 SFAS No. 52, "Foreign Currency Translation," a transaction is classified as a hedge when it 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 item. Any unrealized gains or losses associated with foreign currency commitments that are classified as speculative are recognized in the current period. Foreign currency gains and losses realized are included in the Consolidated Statements of Income in Selling and Administration. 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 item. Premiums paid for currency options and gains or losses on forward sales and purchase contracts were not material to operating results. Foreign currency exchange gains (losses), net of taxes, were $(1) in 1998, $1 in 1997, and less than $(1) in 1996. Depending on market conditions, the Company may enter into futures contracts and put and call option contracts in order to reduce the impact of metal price fluctuations, principally in copper, lead and zinc. In accordance with SFAS No. 80, "Accounting for Futures Contracts," futures contracts are classified as a hedge when the item to be hedged exposes the Company to price risk and the futures contract reduces that risk exposure. Futures contracts that relate to transactions that are expected to occur are accounted for as a hedge when the significant characteristics and expected terms of the anticipated transaction are identified and it is probable that the anticipated transaction will occur. If a transaction does not meet the criteria to qualify as a hedge, it is considered to be speculative. Any gains or loses associated with futures contracts which are classified as speculative are recognized in the current period. If a futures contract that has been accounted for as a hedge is closed or matures before the date of the anticipated transaction, the accumulated change in value of the contract is carried forward and included in the measurement of the related transaction. Option contracts are accounted for in the same manner that futures contracts are accounted for. At December 31, 1998, the Company has open positions in futures contracts totaling $44 (1997- $37). If these futures contracts had been settled on December 31, 1998, the Company would have incurred a loss of $3. Gains (losses) on futures contracts, net of taxes, were $(2) in 1998 and $1 in 1997 and 1996. Financial Instruments The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximated fair values due to the short-term maturities of these instruments. The fair value of the Company's long-term debt was determined based on current market rates for debt of the same risk and maturities. At December 31, 1998, the estimated fair value of debt was $235 (1997-$277). The fair values of currency forward 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 continue to account for stock-based compensation cost in accordance with Accounting Principles Board Opinion 36 No. 25, "Accounting for Stock Issued to Employees." Under this option, compensation cost is recorded when the fair market value of the Company's stock at the date of grant for fixed options exceeds the exercise price of the stock option. The Company's policy is to grant stock options at a value equal to its common stock's fair market value on the date of the grant. 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. Earnings Per Share Basic earnings per share are computed by dividing net income less the ESOP preferred stock dividend requirement (to the date of its redemption in 1996), and the redemption adjustment (excess of fair value over book value of ESOP shares redeemed) by the weighted average number of common shares outstanding. In December 1996, the Company redeemed the ESOP preferred stock with shares of common stock of equivalent value. Diluted earnings per share reflect the dilutive effect of stock options and assumed the conversion of outstanding ESOP preferred stock, until its redemption in December 1996, into an equivalent number of common shares at the date of issuance. Net income was reduced by an additional ESOP contribution (differential between the common and the ESOP preferred dividend rates under an assumed conversion) necessary to satisfy the debt service requirement.
Computation of Earnings per Share 1998 1997 1996 - --------------------------------- ------- ------- ------- Basic earnings per share Income from continuing operations...................... $ 38 $ 97 $ 227 Less ESOP preferred dividends, net of tax benefit...... -- -- (4) Redemption adjustment.................................. -- -- (8) ------- ------- ------- $ 38 $ 97 $ 215 ------- ------- ------- Basic shares (in thousands)............................ 47,643 50,519 49,992 ------- ------- ------- Basic earnings per share-continuing operations......... $ 0.79 $ 1.91 $ 4.30 ======= ======= ======= Diluted earnings per share Income from continuing operations...................... $ 38 $ 97 $ 227 Less additional ESOP contribution...................... -- -- (4) ------- ------- ------- $ 38 $ 97 $ 223 ------- ------- ------- Diluted Shares (in thousands): Basic shares......................................... 47,643 50,519 49,992 Assumed conversion ESOP preferred stock.............. -- -- 1,950 Stock options........................................ 224 368 369 ------- ------- ------- 47,867 50,887 52,311 ------- ------- ------- Diluted earnings per share-continuing operations....... $ 0.79 $ 1.90 $ 4.26 ======= ======= =======
The Board of Directors has authorized the Company to purchase up to 10 million shares of common stock of the Company under two share repurchase programs which began in January of 1997. During 1998 and 1997 the Company repurchased 3.1 million and 3.8 million shares, respectively. It is expected that the programs will be completed during 1999. 37 Short-term Investments
1998 1997 ---- ---- Tax exempt...................................................... $20 $28 Certificates of deposit......................................... 4 -- U.S. Government and government agencies......................... 1 -- --- --- Total......................................................... $25 $28 === ===
Trade Receivables Allowance for doubtful items was $6 at December 31, 1998 and 1997. Provisions charged to operations were $1 in 1998, 1997 and 1996. Bad debt write-offs, net of recoveries were $1 in 1998 and $2 in 1997 and 1996. Inventories
1998 1997 ---- ---- Raw materials and supplies.................................... $113 $108 Work in process............................................... 102 113 Finished goods................................................ 47 73 ---- ---- 262 294 LIFO reserves................................................. (63) (86) ---- ---- Inventory, net.............................................. $199 $208 ==== ====
Inventories valued using the LIFO method comprised 79% and 78% of the total inventories at December 31, 1998 and 1997, respectively. During 1998, LIFO inventory quantities were reduced resulting in the liquidation of one LIFO layer and part of another layer. The effect of this liquidation increased net income by $1. Property, Plant and Equipment
Useful Lives 1998 1997 ------------ ------ ------ Land and improvements to land................. 10--20 Years $ 49 $ 49 Buildings and building equipment.............. 10--25 Years 172 169 Machinery and equipment....................... 3--12 Years 1,251 1,266 Leasehold improvements........................ 3 4 Construction in progress...................... 75 58 ------ ------ Property, plant and equipment............... 1,550 1,546 Less accumulated depreciation................. 1,075 1,029 ------ ------ Property, plant and equipment, net.......... $ 475 $ 517 ====== ======
Leased assets capitalized and included above are not significant. Maintenance and repairs charged to operations amounted to $109, $92, and $114 in 1998, 1997 and 1996 respectively. Short-Term Borrowings At December 31, 1998 and 1997, the Company maintained committed credit facilities with banks of $254 all of which was available in both years. Included in the $254 committed credit facility is an unsecured revolving credit agreement with a group of banks, which provides a maximum borrowing of $250, and expires in October 2002. The Company may select various floating rate borrowing options. 38 Long-Term Debt
1998 1997 ---- ---- Notes payable: 7.11%, due 2005.............................................. $ 50 $ 50 7.75%, due 2005.............................................. 11 11 7.97%, due 1999-2002......................................... -- 38 8%, due 2002................................................. 100 100 Industrial development and environmental improvement obligations: Payable at interest rates of 1% to 5% which vary with short- term tax exempt rates, due 2004-2017........................ 35 35 Payable at interest rates of 6% to 7%, due 1999-2008......... 35 36 ---- ---- Total senior debt.......................................... 231 270 Amounts due within one year.................................... 1 8 ---- ---- Total long-term debt....................................... $230 $262 ==== ====
In June 1995, the Company sold $50 of 7.11% notes with a maturity date of June 2005. The proceeds from this issue were used to reduce short-term debt incurred for working capital purposes. At December 31, 1998, there remains $248 unissued under the medium-term note program registered in May 1994. During 1992, the Company swapped interest payments on $50 principal amount of its 8% notes due 2002 to a floating rate (5.15602% at December 31, 1998). In June 1995, the Company offset this transaction by swapping interest payments to a fixed rate of 6.485%. The difference between interest paid and interest received is included as an adjustment to interest expense. A settlement of the fair market value of the interest rate swap as of December 31, 1998 would result in a receipt of approximately $2. Counterparties to interest rate swap contracts are major financial institutions. The risk of loss to the Company in the event of nonperformance by a counterparty is not significant. Annual maturities of long-term debt for the next five years are $1 in 1999, 2000 and 2001, and $101 in 2002 and $1 in 2003. Interest expense incurred on short-term borrowings and long-term debt totaled $18 in 1998, $25 in 1997 and $29 in 1996; of which $1 was capitalized in 1998 and 1997 and $2 in 1996. 39 Pension Plans and Retirement Benefits Essentially all of the Company's domestic pension plans are non-contributory final-average-pay or flat-benefit plans and all domestic employees are covered. The Company's funding policy is consistent with the requirements of federal laws and regulations. The Company provides certain postretirement health care and life insurance benefits for eligible active and retired domestic employees.
Other Pension Postretirement Benefits Benefits -------------- -------------- Change in Benefit Obligation 1998 1997 1998 1997 - ---------------------------- ------ ------ ------- ------- Benefit obligation at beginning of year..... $1,155 $1,021 $ 71 $ 62 Service cost................................ 15 21 1 1 Interest cost............................... 79 79 5 5 Amendments.................................. 1 4 -- -- Actuarial loss (gain)....................... 8 110 2 10 Benefits paid............................... (78) (85) (8) (8) Acquisitions and divestitures............... -- 5 -- 1 ------ ------ ------- ------- Benefit obligation at end of year........... $1,180 $1,155 $ 71 $ 71 ====== ====== ======= ======= Pension Benefits -------------- Change in Plan Assets 1998 1997 - --------------------- ------ ------ Fair value of plan assets at beginning of year....................................... $1,224 $1,111 Actual return on plan assets................ 146 178 Employer contribution....................... 3 14 Acquisition asset transfers................. -- 6 Benefits paid............................... (78) (85) ------ ------ Fair value of plan assets at end of year.... $1,295 $1,224 ====== ====== Other Pension Postretirement Benefits Benefits -------------- -------------- 1998 1997 1998 1997 ------ ------ ------- ------- Funded status............................... $ 115 $ 69 $ (71) $ (71) Unrecognized actuarial (gain) loss.......... (146) (105) 13 11 Unrecognized transition obligation (asset).. (13) (19) -- -- Unrecognized prior service cost............. 29 30 (4) (5) ------ ------ ------- ------- Net amount recognized....................... $ (15) $ (25) $ (62) $ (65) ====== ====== ======= ======= Amounts recognized in the consolidated balance sheet consist of: Prepaid benefit cost...................... $ 12 $ 1 $ -- $ -- Accrued benefit liability................. (29) (26) (62) (65) Accumulated other comprehensive income.... 2 -- -- -- ------ ------ ------- ------- Net amount recognized..................... $ (15) $ (25) $ (62) $ (65) ====== ====== ======= =======
Principal Assumptions 1998 1997 - --------------------- ---- ---- Weighted average discount rate...................................... 7.0% 7.25% Weighted average rate of compensation increase...................... 4.5% 4.5% Long-term rate of return on assets.................................. 9.5% 9.5% === ====
40
Other Pension Postretirement Benefits Benefits ---------------- ---------------- Components of Net Periodic Benefit Cost (Income) 1998 1997 1996 1998 1997 1996 - --------------------------------------- ---- ---- ---- ---- ---- ---- Service cost............................... $ 15 $ 21 $ 22 $ 1 $ 1 $ 2 Interest cost.............................. 79 79 74 5 5 4 Expected return on plan assets............. (99) (92) (87) -- -- -- Amortization of prior service cost......... 4 3 4 (1) (1) (1) Recognized actuarial loss (gain)........... (6) (6) (6) 1 1 -- ---- ---- ---- --- --- --- Net periodic benefit cost (income)......... $ (7) $ 5 $ 7 $ 6 $ 6 $ 5 ==== ==== ==== === === ===
The Company's common stock represents approximately 2% of the plan assets at December 31, 1998 and 1997. The Company's foreign subsidiaries maintain pension and other benefit plans which are consistent with statutory practices and are not significant. The Pension Plan of Olin Corporation provides that if, within three years following a change of 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 transfer thereafter takes place, plan benefits would automatically be increased for affected participants (and retired participants) to absorb any plan surplus. In addition to the net pension expense above, during 1996 the Company recorded a $6 curtailment loss in connection with the sale of the isocyanates business and the spin-off of the Ordnance and Aerospace divisions as Primex Technologies, Inc. ("Primex"). The accumulated postretirement benefit obligation was determined using the projected unit credit method and an assumed discount rate of 7% in 1998, 7.25% in 1997 and 8% in 1996. The assumed health care cost trend rate used for pre- 65 retirees was 8% in 1998, 9.7% in 1997 and 11% in 1996, declining one-half percent per annum to 5.0%. For post-65 retirees, the Company provides a fixed dollar benefit which is not subject to escalation. Assumed health care cost trend rates have a significant effect on the amounts reported for the postretirement health care plan. A one-percentage- point increase (decrease) in assumed health care cost trend rates would have a less than $1 increase (decrease) in total service and interest cost components and a $3 increase (decrease) in the postretirement benefit obligation. Subsequent to the spin-off of Arch Chemicals on February 8, 1999, Arch Chemicals will become liable for the payment of all pension plan benefits earned by Arch Chemicals employees prior to and following the spin-off who retire after the spin-off. The Olin pension plan will transfer assets to the Arch Chemicals pension plan and the amount of the assets will be calculated based on the relative percentage of the Projected Benefit Obligation. Such amount may be adjusted to comply with the asset allocation methodology set forth in section 4044 of the Employee Retirement Income Security Act of 1974, as amended, if necessary. Olin will remain liable for postretirement, medical and death benefits provided to all employees who retire prior to the spin-off. Arch Chemicals will become liable for the payment of all retiree medical and death benefits earned by Arch Chemicals employees prior to and following the spin-off who retire after the spin-off. The postretirement plan is an unfunded plan, therefore no assets were transferred. In connection with the spin-off of Arch Chemicals in the first quarter of 1999, the Company transferred $7 of postretirement benefit liability to Arch Chemicals. During 1996 in connection with the spin-off of Primex Technologies, Inc., the Company transferred $8 of postretirement benefit liability to Primex Technologies, Inc. 41 Income Taxes
Components of Pretax Income from Continuing Operations 1998 1997 1996 - ------------------------------------------------------ ---- ---- ---- Domestic...................................................... $ 54 $144 $347 Foreign....................................................... 5 3 5 ---- ---- ---- Pretax income................................................. $ 59 $147 $352 ==== ==== ==== Components of Income Tax Expense (Benefit) - ------------------------------------------ Currently payable: Federal..................................................... $(88) $ 12 $171 State....................................................... 3 (4) 31 Foreign..................................................... 2 1 1 ---- ---- ---- (83) 9 203 Deferred...................................................... 104 41 (78) ---- ---- ---- Income tax expense............................................ $ 21 $ 50 $125 ==== ==== ====
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 from continuing operations before taxes.
Effective Tax Rate Reconciliation (Percent) 1998 1997 1996 - ------------------------------------------- ---- ---- ---- Statutory federal tax rate.................................... 35.0 35.0 35.0 Foreign income tax............................................ (0.3) (0.9) (0.2) State income taxes, net....................................... 1.7 0.2 3.5 Equity in net income of affiliates............................ (0.9) (0.4) (0.2) Other, net.................................................... 0.1 0.1 (2.6) ---- ---- ---- Effective tax rate............................................ 35.6 34.0 35.5 ==== ==== ====
Components of Deferred Tax Assets and Liabilities 1998 1997 - ------------------------------------------------- ---- ---- Deferred tax assets: Pension and postretirement benefits................................. $ 30 $34 Environmental reserves.............................................. 50 51 Non-deductible reserves............................................. 46 36 Other miscellaneous items........................................... 22 15 ---- --- Total deferred tax assets............................................. 148 136 ---- --- Deferred tax liabilities: Property, plant and equipment....................................... 69 45 Capital loss........................................................ 80 -- Other miscellaneous items........................................... 24 12 ---- --- Total deferred tax liabilities........................................ 173 57 ---- --- Net deferred tax asset (liability).................................... $(25) $79 ==== ===
Included in Other Current Assets at December 31, 1998 and 1997 are $12 and $10, respectively, of net current deferred assets. At December 31, 1998, the Company's share of the cumulative undistributed earnings of foreign subsidiaries was approximately $25. 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. 42 Accrued Liabilities Included in accrued liabilities are the following items:
1998 1997 ----- ---- Accrued compensation and employee benefits.................... $ 43 $ 50 Environmental................................................. 30 30 Accrued costs for sales and restructurings of businesses and spin-off costs............................................... 30 -- Accrued insurance............................................. 21 22 Other......................................................... 44 77 ----- ---- $ 168 $179 ===== ====
Contributing Employee Ownership Plan The Contributing Employee Ownership Plan is a defined contribution plan available to essentially all domestic employees which provides a match of employee contributions. The plan purchased from the Company approximately 1.3 million shares ($100) of a newly authorized 1.75 million share series of the Company's ESOP preferred stock, financed by $60 of notes guaranteed by the Company and a $40 loan from the Company. This loan has been repaid in total to the Company as of December 31, 1992. In December 1996, the Board of Directors approved the redemption of all outstanding shares of ESOP preferred stock with common stock of equivalent value. Upon redemption of the ESOP preferred stock, the Company is matching employee contributions with common stock. The annual fixed preferred dividend rate was $5.97 per share and during 1996, dividends were paid in the first three quarters. Expenses related to the plan are based on ESOP preferred and common stock allocated to participants. These costs (primarily the Company's contributions) amounted to $8, $9 and $8 in 1998, 1997 and 1996, respectively. Interest incurred by the plan totaled $1 in 1996, which was funded by ESOP preferred dividends. 43 Stock Options Under the stock option plans, options may be granted to purchase shares of the Company's common stock at not less than fair market value at the date of grant, and are exercisable for a period not exceeding ten years from that date. Options granted under the 1996 stock option plan vest over three years. The 1996 stock option plan is the only plan with stock options available for future grants. At December 31, 1998, approximately 937,000 shares were available for future grants. As a result of the spin-off of Arch Chemicals the outstanding Olin options as of February 8, 1999 were converted into both an option to purchase Olin common stock and an option to purchase Arch Chemicals common stock with an adjustment of the exercise price designed to preserve the "intrinsic value" at the time of the spin-off. Olin will be responsible for delivering shares of the Olin common stock upon exercise, and Arch Chemicals will be responsible for the delivering of shares of Arch Chemicals stock upon exercise. The options maintain the original vesting schedule. The following table has been restated to reflect the new option price of the Olin options as a result of the transaction described above. Stock option transactions are as follows:
Weighted Average Option Price Option Price Shares Per Share Per Share --------- -------------- ---------------- Outstanding at January 1, 1996....... 1,554,268 $13.34--$20.48 $16.12 Granted............................ 1,441,641 24.68--25.49 24.68 Exercised.......................... (347,232) 13.63--17.53 15.79 Canceled........................... (250,958) 15.04--24.68 23.69 --------- -------------- ------ Outstanding at December 31, 1996..... 2,397,719 13.34--25.49 20.20 Granted............................ 599,200 24.34--29.69 24.43 Exercised.......................... (413,258) 13.34--24.68 18.08 Canceled........................... (137,198) 24.34--24.68 24.57 --------- -------------- ------ Outstanding at December 31, 1997..... 2,446,463 13.34--29.69 21.36 Granted............................ 835,700 18.33--29.38 27.12 Exercised.......................... (84,528) 13.34--24.68 19.12 Canceled........................... (84,486) 16.04--29.38 25.75 --------- -------------- ------ Outstanding at December 31, 1998..... 3,113,149 $13.34--$29.69 $22.85 ========= ============== ======
Of the outstanding options at December 31, 1998, options covering 1,667,408 shares are currently exercisable at a weighted average exercise price of $20.19. At December 31, 1998, common shares reserved for issuance under these plans were 4,050,654 and under additional remuneration agreements were estimated to be 130,000. 44 In 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation". As allowed by SFAS No. 123, the Company has not recognized compensation cost for stock-based compensation arrangements. Pro forma net income and earnings per share were calculated based on the following assumptions as if the Company had recorded compensation expense for the stock options granted during the year. The fair value of each option granted during 1998, 1997 and 1996 was estimated on the date of grant, using the Black- Scholes option-pricing model with the following weighted-average assumptions used: dividend yield of 3.2% in 1998, 2.8% in 1997 and 4.0% in 1996, risk-free interest rate of 5.5% in 1998 and 1997 and 6.5% in 1996, expected volatility of 27% in 1998, 21% in 1997 and 22% in 1996 and an expected life of 7 years. The fair value of options granted during 1998, 1997 and 1996 was $11.77, $9.53 and $7.54, respectively. The following table shows the difference between reported and pro forma net income and earnings per share as if the Company had recorded compensation expense for the stock options granted during the year.
($ in millions except per share data) 1998 1997 1996 - ------------------------------------- ---- ---- ---- Net Income As reported.................................................. $ 78 $153 $280 Pro forma.................................................... 72 149 277 Per Share Data: Basic As reported.................................................. 1.64 3.02 5.34 Pro forma.................................................... 1.52 2.96 5.29 Diluted As reported.................................................. 1.63 3.00 5.27 Pro forma.................................................... 1.52 2.95 5.23
Common Stock In connection with the spin-off of Primex in 1996, its employees were allowed to transfer their account balances from the Company's CEOP into Primex's savings and retirement plan. The Company issued .3 million shares of common stock at a value of $40.50 in exchange for .2 million shares of ESOP preferred stock at a per share value of $85.63 at the time of the transfer. In December 1996, the Company's board of directors approved the redemption of all outstanding shares of ESOP preferred stock with common stock of equivalent value. Approximately 1.87 million shares of common stock at a per share value of $40.19 were issued in exchange for approximately .9 million shares of ESOP preferred stock at a per share value of $85.75. Shareholder Rights Plan Effective February 1996, the Board of Directors adopted a new Shareholder Rights Plan to replace the prior plan which had been adopted in 1986. Like the former plan, the new plan is designed to prevent an acquiror from gaining control of the Company without offering a fair price to all shareholders. Each right entitles a shareholder (other than the acquiror) to buy one-five hundredth share of Series A Participating Cumulative Preferred Stock at an exercise price of one hundred twenty dollars. The rights are exercisable only if a person acquires more than 15% of the Company's common stock or if the Board of Directors so determines following the commencement of a tender or exchange offer to acquire more than 15% of the Company's common stock. If any person acquires more than 15% of the Company's common stock and in the event of a subsequent merger or combination, each right will entitle the holder (other than the acquiror) to purchase stock or other property of the acquiror having a value of twice the exercise price. The Company can redeem the rights at $.005 per right for a certain period of time. The rights will expire on February 27, 2006, unless earlier redeemed by the Company. 45 Segment Information Segment operating income is defined as earnings before interest, other income and income taxes and includes earnings of non-consolidated affiliates which is included in other income in the Consolidated Statements of Income. Segment operating results in 1998 exclude the charge for the sale of the microelectronic packaging unit at Manteca, CA and the restructuring of the rod, wire and tube businesses at Indianapolis, IN ($42 pretax); and non- recurring costs associated with the spin-off of Arch Chemicals ($21 pretax). Segment operating income in 1996 excludes the gain on the sale of the isocyanates business ($188 pretax) and non-recurring costs associated with the spin-off of Primex ($9 pretax). In 1996, the "other" segment includes the operating results of the isocyanates business which was sold in December 1996.
1998 1997 1996 ------ ------ ------ Sales: Chlor Alkali Products............................. $ 366 $ 411 $ 397 Metals............................................ 799 836 809 Winchester........................................ 261 252 256 Other............................................. -- -- 296 ------ ------ ------ Total sales............................................ $1,426 $1,499 $1,758 ====== ====== ====== Operating Income (Loss) Before Loss/Gain on Sales and Restructuring of Businesses and Spin-off Costs: Chlor Alkali Products............................. $ 55 $ 99 $ 86 Metals............................................ 64 62 60 Winchester........................................ 13 (4) (2) Other............................................. -- -- 46 ------ ------ ------ Total Operating Income................................. $ 132 $ 157 $ 190 ====== ====== ====== Equity Income in Affiliated Companies, Included in Operating Income: Chlor Alkali Products............................. $ (1) $ (2) $ -- Metals............................................ 1 3 2 ------ ------ ------ Total Equity Income in Affiliated Companies............ $ -- $ 1 $ 2 ====== ====== ====== Depreciation Expense: Chlor Alkali Products................................. $ 32 $ 32 $ 19 Metals................................................ 31 30 29 Winchester............................................ 10 10 10 Other................................................. 3 4 26 ------ ------ ------ Depreciation Expense................................... $ 76 $ 76 $ 84 ====== ====== ====== Amortization Expense: Metals................................................ $ 2 $ 2 $ 2 ====== ====== ====== Capital Spending: Chlor Alkali Products................................. $ 31 $ 22 $ 15 Metals................................................ 25 28 38 Winchester............................................ 12 9 7 Other................................................. 10 17 14 ------ ------ ------ Total Capital Spending................................. $ 78 $ 76 $ 74 ====== ====== ====== Investments in and Advances to Affiliated Companies at Equity: Chlor Alkali Products............................. $ 3 $ 84 $ 103 ====== ====== ====== Assets: Chlor Alkali Products................................. $ 297 $ 290 $ 287 Metals................................................ 440 487 455 Winchester............................................ 161 155 152 Other................................................. 174 319 938 Net Assets of Discontinued Operations................. 505 456 430 ------ ------ ------ Total Consolidated Assets.............................. $1,577 $1,707 $2,262 ====== ====== ====== Investments & Advances--Affiliated Companies at Equity: Chlor Alkali Products................................. $ 7 $ 7 $ 122 Metals................................................ 5 3 5 Other................................................. -- -- 25 ------ ------ ------ Total Investments & Advances--Affiliated Companies..... $ 12 $ 10 $ 152 ====== ====== ======
46 Segment operating income includes an allocation of corporate charges based on various allocation methodologies. 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 product lines of the Company.
Geographic Data: 1998 1997 1996 - ---------------- ------ ------ ------ Sales United States......................................... $1,388 $1,456 $1,593 Foreign............................................... 38 43 165 Transfers between areas United States......................................... 10 9 101 Foreign............................................... -- -- 10 Eliminations.......................................... (10) (9) (111) ------ ------ ------ Total Sales............................................. $1,426 $1,499 $1,758 ====== ====== ====== Assets United States......................................... $1,084 $1,263 $1,808 Foreign............................................... 42 32 36 Investments........................................... 4 10 31 Eliminations.......................................... (58) (54) (43) Net Assets of Discontinued Operations................. 505 456 430 ------ ------ ------ Total Assets............................................ $1,577 $1,707 $2,262 ====== ====== ======
Transfers between geographic areas are priced generally at prevailing market prices. Export sales from the United States to unaffiliated customers were $82, $86, and $109 in 1998, 1997, and 1996, respectively. 47 Acquisitions In February 1997, the Company completed its purchase of the remaining 50% of Niachlor with a final payment of $2 to E.I. du Pont de Nemours and Company (DuPont). In December 1996, the Company made an advance payment of $75 to DuPont, which was included in Investments and Advances-Affiliated Companies at Equity in the December 31, 1996 Balance Sheet. This acquisition was accounted for as a purchase and accordingly, the results of operations, which were not material, are included in the consolidated financial statements from the date of acquisition. Supplemental cash flow information on businesses acquired is as follows:
1997 ----- Working capital.................................................... $ (5) Property, plant and equipment...................................... 112 Other liabilities.................................................. (5) Investments and advances--affiliated companies..................... (25) ----- Purchase price..................................................... $ 77 =====
Dispositions and Restructurings During 1998 the Company recorded a pretax loss of $63 related to the sale of Olin Interconnect Technologies ($8), the restructuring of the rod, wire, and tube business at Indianapolis, IN ($34) and non-recurring costs associated with the spin-off of Arch Chemicals ($21). In October 1997, the Company and Asahi Glass Company established separate ownership of two joint ventures the companies had previously formed in polyols and microelectronic packaging systems. The Company became the sole owner of Aegis, Inc., a manufacturer of metal hermetic packages that was established in 1986. Conversely, Asahi Glass Company became the sole owner of the former Asahi-Olin joint venture in polyols that was established in 1974. In December of 1996 the Company sold its isocyanates business for $565 in cash. The sale included all assets at the Company's Lake Charles, LA facility used in the manufacture and sale of toluene diisocyanate, aliphatic isocyanates and nitric acid. In connection with the transaction, the Company recorded a pre-tax gain of $188 ($115 after tax gain) which is included in Gain (Loss) on Sales and Restructurings of Businesses and Spin-Off Costs. The Company's results of operations for 1996 included sales of $296 and net income of $33, from the isocyanates business. Supplemental cash flow information on businesses disposed is as follows:
1998 1997 1996 ----- ----- ----- Proceeds............................................. $ 4 $ 5 $ 571 Working capital...................................... (4) -- (123) Property, plant and equipment........................ (8) -- (177) Investments and advances............................. -- (11) -- Other assets......................................... -- 3 (5) Other liabilities.................................... -- 3 (78) ----- ----- ----- Gain (Loss) on disposition of businesses............. $ (8) $ -- $ 188 ===== ===== =====
48 The following table summarizes the major components of the 1998 charges and the remaining balances as of December 31, 1998 excluding the non-cash asset writedown described below:
Accrued Amounts Restructuring Charge Utilized Costs ------ -------- ------------- Employee termination and severance.......... $ 14 $ -- $ 14 Legal and investment banker fees............ 8 (1) 7 Exit costs.................................. 5 -- 5 Other....................................... 5 (1) 4 ---- ----- ---- $ 32 $ (2) $ 30 ==== ===== ====
In September of 1998 the Company announced that it had offered its rod, wire, and tube business at Indianapolis for sale. These businesses were not profitable due to strong domestic and international competition and were not expected to improve significantly. Since the Company was unable to sell the rod, wire, and tube businesses the Company decided to shut down the operations, which occurred on December 31, 1998. The Company will continue to produce sheet and strip copper based alloys at the Indianapolis facility. The assets of the rod, wire, and tube businesses include machinery and equipment with a carrying value of $30. A valuation allowance has been recorded to reflect the estimated net realizable value of the assets net of the amount expected to be recovered in the sale of those assets of $7 over the next twelve months. In 1998, the rod, wire, and tube businesses generated sales of $26 and operating losses of $8. Employee termination and severance costs relate to the termination of approximately 450 of the 900 employees at the Indianapolis facility as well as approximately 140 employees at the Company's corporate headquarters in Norwalk, CT and various international subsidiaries. The Indianapolis terminations were primarily manufacturing positions while the corporate and international terminations included various corporate functions such as finance, legal, human resources and information technology. The majority of the termination and severance benefits will be paid over the next twelve months. Legal and investment banker fees relate to the spin-off of Arch Chemicals and are expected to be paid in the next six months. In connection with the spin-off of Primex in 1996, the Company recorded $9 in spin-off costs which related primarily to pension curtailment, investment banker and legal fees. Discontinued Operations On February 8, 1999, the Company completed the spin-off of its specialty chemicals businesses as Arch Chemicals, Inc. Under the terms of the spin-off, the Company distributed to its holders of common stock as of the close of business on February 1, 1999 one Arch Chemicals common share for every two shares of Olin common stock. In February 1999 prior to the distribution, Olin borrowed $75 under a credit facility, which liability was assumed by Arch Chemicals. On December 31, 1996 the Company completed the spin-off of its Ordnance and Aerospace businesses as Primex. Under the terms of the spin-off, the Company distributed to its holders of common stock as of the close of business on December 19, 1996, one Primex common share for every ten shares of Olin common stock. The spin-off distribution reduced shareholders' equity by $145 which represents the book value of the net assets of Primex as of December 31, 1996. The historical operating results of these businesses are shown net of tax as discontinued operations in the consolidated statements of income. The discontinued operations include an allocation 49 of corporate overhead 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 those expenses would have been had Arch Chemicals or Primex operated independently of Olin. Net assets of discontinued operations in the consolidated balance sheet include those assets and liabilities attributable to the Arch Chemicals business. The historical results for the Primex discontinued operations include an allocation of the Company's interest expense based on an assumed debt level providing a debt to capital ratio similar to that of the Company as well as a level of debt that Primex could maintain on an independent basis in the future. The allocated debt of $125 represents the amount borrowed by the Company under a credit facility established by the Company and assumed by Primex prior to the distribution on December 31, 1996. The cash received by the Company under this credit facility was used to liquidate its existing debt. The Company has entered into tax sharing agreements with both Arch Chemicals and Primex effectively providing that the Company will be responsible for the tax liability of Arch Chemicals and Primex for the years that Arch Chemicals and Primex were included in the Company's consolidated income tax returns. Income taxes have been allocated to Arch Chemicals and Primex based on their pretax income and calculated on a separate company basis pursuant to the requirements of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Income taxes allocated to the discontinued operations were $21, $30 and $35 in 1998, 1997 and 1996, respectively. In addition, the Company entered into several other agreements with Arch Chemicals and Primex which cover such matters as technology transfers, transition services, covenants not to compete, chlorine and caustic supply and powder and component supplies. Condensed historical combined balance sheet and income statement data of the discontinued operations are summarized below:
1998 1997 ----- ----- Combined Balance Sheets Total assets.......................................... $ 722 $ 693 Total liabilities..................................... 217 237 Equity................................................ 505 456 1998 1997 1996 ----- ----- ------ Combined Statements of Income Sales................................................. $ 863 $ 930 $1,385 Net income............................................ 40 56 53
Environmental The Company is party to various governmental and private environmental actions associated with waste disposal sites and manufacturing facilities. Environmental provisions charged to income amounted to $16 in 1998, $17 in 1997 and $70 in 1996. In 1996, in connection with the sale of the isocyanates business a $53 provision was recorded to provide for contractual liabilities related to future environmental spending at the Lake Charles, LA site. Charges to income for investigatory and remedial efforts were material to operating results in 1998, 1997 and 1996. The consolidated balance sheets include reserves for future environmental expenditures to investigate and remediate known sites amounting to $129 at December 31, 1998 and $133 at December 31, 1997, of which $99 and $103 are classified as other noncurrent liabilities, respectively. 50 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. It is possible that some of these matters (the outcomes of which are subject to various uncertainties) may be resolved unfavorably against the Company. At December 31, 1998, the Company had estimated additional contingent environmental liabilities of $40. Commitments and Contingencies The Company leases certain properties, such as railroad cars, 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 $38 in 1998, $33 in 1997 and $37 in 1996, (sublease income is not significant). Future minimum rent payments under operating leases having initial or remaining noncancelable lease terms in excess of one year at December 31, 1998 are as follows: $17 in 1999; $15 in 2000; $12 in 2001; $10 in 2002; $8 in 2003; and $23 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. 51 Other Financial Data Quarterly Data (Unaudited)
First Second Third Fourth 1998 Quarter Quarter Quarter(/1/) Quarter(/2/) Year(/1/)(/2/) - ---- ------- ------- ------------ ------------ -------------- Sales................... $ 359 $ 348 $ 383 $ 336 $ 1,426 Cost of goods sold...... 287 285 320 269 1,161 Income (loss) from continuing operations.. 23 17 (11) 9 38 Net income (loss)....... 39 38 (7) 8 78 Per common share: Basic Income (loss) from continuing operations........... .47 .37 (.24) .19 .79 Net income (loss)..... .81 .81 (.15) .16 1.64 Diluted Income (loss) from continuing operations........... .46 .37 (.24) .19 .79 Net income (loss)..... .80 .80 (.15) .16 1.63 Common dividends per share.................. .30 .30 .30 .30 1.20 Market price of common stock(/3/) High.................. 49 5/16 48 3/4 41 5/8 30 7/8 49 5/16 Low................... 42 5/16 39 7/8 23 7/8 24 13/16 23 7/8 1997 - ---- Sales................... $ 366 $ 368 $ 384 $ 381 $ 1,499 Cost of goods sold...... 294 301 301 307 1,203 Income from continuing operations............. 25 18 28 26 97 Net income.............. 42 39 38 34 153 Per common share: Basic Income from continuing operations........... .48 .36 .55 .53 1.91 Net income............ .81 .75 .76 .70 3.02 Diluted Income from continuing operations........... .47 .36 .54 .53 1.90 Net income............ .80 .75 .75 .70 3.00 Common dividends per share ................. .30 .30 .30 .30 1.20 Market price of common stock (/3/) High.................. 43 1/4 43 48 7/8 51 3/8 51 3/8 Low................... 35 3/8 36 38 1/4 40 3/4 35 3/8
- -------- (1) Operating results include a charge for the sale of the microelectronic packaging unit at Manteca, CA and the restructuring of the rod, wire and tube businesses at Indianapolis, IN ($42 pretax, $26 after tax and $.55 diluted earnings per share). (2) Operating results include non-recurring costs associated with the spin-off of Arch Chemicals, Inc. primarily severance, investment banking and legal fees ($21 pretax, $15 after tax and $.32 diluted earnings per share). (3) New York Stock Exchange composite transactions. 52 Economic Value Added Performance Measure (Unaudited)
1998 1997 1996 ------ ------ ------ Earnings before interest and taxes(/1/) --continuing operations............................ $ 136 $ 161 $ 198 --discontinued operations.......................... 61 86 95 ------ ------ ------ 197 247 293 Adjustments(/2/).................................... 22 22 47 ------ ------ ------ Operating profit before taxes....................... 219 269 340 Cash taxes at 35%................................... (77) (94) (119) ------ ------ ------ Net operating profit after taxes.................... 142 175 221 Strategic investment(/3/)........................... 3 -- -- Capital charge...................................... (121) (108) (158) ------ ------ ------ EVA................................................. $ 24 $ 67 $ 63 ====== ====== ====== Average capital employed............................ $1,288 $1,162 $1,673 ====== ====== ====== Return on capital................................... 11.3% 15.1% 13.2% ====== ====== ====== Cost of capital..................................... 9.4% 9.4% 9.4% ====== ====== ======
- -------- (1) EBIT excludes (i) $63 charge in 1998 related to the sale of the microelectronic packaging unit at Manteca, CA and the restructuring of the rod, wire and tube businesses at Indianapolis, IN ($42) and non-recurring costs associated with the spin-off of Arch Chemicals ($21) and; (ii) the gain on sale of TDI and ADI businesses of $188 in 1996. (2)Adjustments include principally environmental provisions and other miscellaneous income (3)Strategic investment relates to adjustment for investment with negative short term EVA impact 53 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant The biographical information relating to Olin's Directors under the heading "Item 1--Election of Directors" in the Proxy Statement relating to Olin's 1999 Annual Meeting of Shareholders (the "Proxy Statement") is incorporated by reference in this Report. See also the list of executive officers following Item 4 of this Report. The information regarding compliance with Section 16 of the Securities Exchange Act of 1934, as amended, contained in the paragraph entitled "Section 16(a) Beneficial Ownership Reporting Compliance" under the heading "Security Ownership of Directors and Officers" in the Proxy Statement is incorporated by reference in this Report. Item 11. Executive Compensation The information under the heading "Executive Compensation" in the Proxy Statement (but excluding the Report of the Compensation Committee on Executive Compensation appearing on pages 10 through 11 of the Proxy Statement and the graph appearing on pages 14 and 15 of the Proxy Statement) is incorporated by reference in this Report. The information under the heading "Additional Information Regarding the Board of Directors--Compensation of Directors" in the Proxy Statement is incorporated by reference in this Report. Item 12. Security Ownership of Certain Beneficial Owners and Management The information concerning holdings of Olin stock by certain beneficial owners contained under the heading "Certain Beneficial Owners" in the Proxy Statement and the information concerning beneficial ownership of Olin stock by directors and officers of Olin under the heading "Security Ownership of Directors and Officers" in the Proxy Statement are incorporated by reference in this Report. Item 13. Certain Relationships and Related Transactions Not applicable. PART IV Item 14. Exhibits, Consolidated Financial Statement Schedules, and Reports on Form 8-K (a) 1. Consolidated Financial Statements Included in Item 8 above. 2. Consolidated Financial Statement Schedules Schedules not included herein are omitted because they are inapplicable or not required or because the required information is given in the consolidated financial statements and notes thereto. 54 Separate consolidated financial statements of 50% or less owned subsidiaries accounted for by the equity method are not summarized herein and have been omitted because, in the aggregate, they would not constitute a significant subsidiary. 3. Exhibits Management contracts and compensatory plans and arrangements are listed as Exhibits 10(a) through 10(s) below. 3(a) Olin's Restated Articles of Incorporation as amended effective May 8, 1997--Exhibit 3 to Olin's Form 10-Q for the Quarter ended March 31, 1997.* (b) By-laws of Olin as amended effective February 8, 1999. 4(a) Articles of Amendment designating Series A Participating Cumulative Preferred Stock, par value $1 per share--Exhibit 2 to Olin's Form 8-A dated February 21, 1996, covering Series A Participating Cumulative Preferred Stock Purchase Rights.* (b) Rights Agreement dated as of February 27, 1996 between Olin and Chemical Mellon Shareholder Services, LLP, Rights Agent--Exhibit 1 to Olin's Form 8-A dated February 21, 1996, covering Series A Participating Cumulative Preferred Stock Purchase Rights.* (c) Form of Senior Debt Indenture between Olin and Chemical Bank-- Exhibit 4(a) to Form 8-K dated June 15, 1992; Supplemental Indenture dated as of March 18, 1994 between Olin and Chemical Bank--Exhibit 4(c) to Registration Statement No. 33-52771; Prospectus Supplement dated June 17, 1992 to Prospectus dated June 16, 1992, with respect to Olin's 8% Senior Notes Due 2002 filed under Registration Statement No. 33-4479; and Prospectus Supplement dated May 26, 1995 to Prospectus dated May 4, 1994 relating to Medium Term Notes, Series A filed under Registration Statement No. 33-52771.* (d) Form of Subordinated Debt Indenture between Olin and Bankers Trust Company--Exhibit 4(i) to Registration No. 33-4479.* (e) Amended and Restated Credit Agreement, dated as of September 30, 1993 and amended and restated as of February 22, 1999, among Olin and the banks named therein. Olin is party to a number of other instruments defining the rights of holders of long-term debt. No such instrument authorizes an amount of securities in excess of 10% of the total assets of Olin and its subsidiaries on a consolidated basis. Olin agrees to furnish a copy of each instrument to the Commission upon request. 10(a) 1980 Stock Option Plan for Key Employees of Olin Corporation and Subsidiaries, as amended--Exhibit 10(a) to Olin's Form 10-K for 1991.* (b) 1988 Stock Option Plan for Key Employees of Olin Corporation and Subsidiaries as amended through February 23, 1995--Exhibit 10(b) to Olin's Form 10-K for 1994.* (c) Amended and Restated Employee Deferral Plan, effective November 1, 1997, as amended and restated effective as of February 8, 1999. (d) Olin Senior Executive Pension Plan with amendments. (e) Olin Supplemental Contributing Employee Ownership Plan, effective January 1, 1990 as amended and restated as of September 24, 1998. (f) Olin Corporation Key Executive Life Insurance Program--Exhibit 10(b) to Olin's Form 10-Q for Quarter ended March 31, 1986.* (g) Form of Olin Corporation Endorsement Split Dollar Agreement (effective January 1, 1993)--Exhibit 10(s) to Olin's Form 10-K for 1992.* (h) Form of executive agreement between Olin and certain executive officers as amended December 10, 1998. 55 (i) Form of special severance agreement provided to certain employees to become operative upon a "change in control event"-Exhibit 10(n) to Olin's Form 10-K for 1997.* (j) Olin 1991 Long Term Incentive Plan, as amended through February 23, 1995--Exhibit 10(u) to Olin's Form 10-K for 1994.* (k) Description of 1991 Performance Unit Awards granted under the Olin 1991 Long Term Incentive Plan--Exhibit 10(w) to Olin's Form 10-K for 1991.* (l) Description of 1992 Performance Unit Awards granted under the Olin 1991 Long Term Incentive Plan--Exhibit 10(z) to Olin's Form 10-K for 1992.* (m) Description of Performance Share Awards granted under the Olin 1991 Long Term Incentive Plan--Exhibit 10 to Olin's Form 10-Q for the quarter ended June 30, 1993.* (n) Amended and Restated 1997 Stock Plan for Non-Employee Directors as amended and restated effective as of February 8, 1999. (o) Olin Senior Management Incentive Compensation Plan as amended April 27, 1995--Exhibit 10(b) to Olin's Form 10-Q for Quarter ended March 31, 1995.* (p) Description of Restricted Stock Unit Awards granted under the Olin 1991 Long Term Incentive Plan--Exhibit 10(bb) to Olin's Form 10-K for 1995.* (q) Form of EVA Incentive Plan (Management Incentive Compensation Plan)--Exhibit 10(dd) to Olin's Form 10-K for 1996.* (r) 1996 Stock Option Plan for Key Employees of Olin Corporation and Subsidiaries--Exhibit A to Olin's 1996 Proxy Statement dated March 12, 1996.* (s) Olin Supplementary and Deferral Benefit Pension Plan. (t) Assumption of Liabilities and Indemnity Agreement, dated December 31, 1996, between Olin Corporation and Primex Technologies, Inc.--Exhibit 10(ii) to Olin's Form 10-K for 1996.* (u) Distribution Agreement between Olin Corporation and Arch Chemicals, Inc., dated as of February 1, 1999 --Exhibit 2.1 to Olin's Form 8-K filed February 23, 1999.* (v) Form of Employee Benefits Allocation Agreement between Olin Corporation and Arch Chemicals, Inc. (w) 364-Day Credit Agreement dated as of January 27, 1999, among Arch Chemicals, Inc., Olin Corporation, the Lenders party thereto, Bank of America, National Trust and Savings Association, as Syndication Agent, Wachovia Bank, N.A., as Documentation Agent, The Chase Manhattan Bank, as Administrative Agent and Chase Securities, Inc., as Arranger.--Exhibit 10.1 to Olin's Form 8-K filed February 23, 1999.* (x) Five-year Credit Agreement dated as of January 27, 1999, among Arch Chemicals, Inc., Olin Corporation, the Lenders party thereto, Bank of America, National Trust and Savings Association, as Syndication Agent, Wachovia Bank, N.A., as Documentation Agent, The Chase Manhattan Bank, as Administrative Agent and Chase Securities, Inc., as Arranger.--Exhibit 10.2 to Olin's Form 8-K filed February 23, 1999.* 11. Computation of Per Share Earnings (included in the Note--"Earnings Per Share" to Notes to Consolidated Financial Statements in Item 8. 12. Computation of Ratio of Earnings to Fixed Charges (unaudited). 21. List of Subsidiaries. 23. Consent of KPMG LLP dated March 16, 1999. 27(a) Financial Data Schedule. 27(b) Restated Financial Data Schedule. 27(c) Restated Financial Data Schedule. - -------- * Previously filed as indicated and incorporated herein by reference. Exhibits incorporated by reference are located in SEC File No. 1-1070 unless otherwise indicated. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 31, 1998. 56 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Olin Corporation Date: March 16, 1999 /s/ Donald W. Griffin By ----------------------------------- Donald W. Griffin Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signature Title Date /s/ Donald W. Griffin Chairman of the March 16, 1999 - ------------------------------------- Board, President Donald W. Griffin and Chief Executive Officer and Director (Principal Executive Officer) /s/ William W. Higgins Director March 16, 1999 - ------------------------------------- William W. Higgins /s/ Robert Holland, Jr. Director March 16, 1999 - ------------------------------------- Robert Holland, Jr. /s/ Suzanne Denbo Jaffe Director March 16, 1999 - ------------------------------------- Suzanne Denbo Jaffe /s/ Randall W. Larrimore Director March 16, 1999 - ------------------------------------- Randall W. Larrimore /s/ G. Jackson Ratcliffe, Jr. Director March 16, 1999 - ------------------------------------- G. Jackson Ratcliffe, Jr. /s/ Richard M. Rompala Director March 16, 1999 - ------------------------------------- Richard M. Rompala /s/ Anthony W. Ruggiero Executive Vice - ------------------------------------- President and Chief Anthony W. Ruggiero Financial Officer (Principal Financial Officer and Principal Accounting Officer) 57 EXHIBIT INDEX 3(b) By-laws of Olin as amended effective February 8, 1999. 4(e) Amended and Restated Credit Agreement, dated as of September 30, 1993 and amended and restated as of February 22, 1999, among Olin and the banks named therein. 10(c) Amended and Restated Employee Deferral Plan, effective November 1, 1997, as amended and restated effective as of February 8, 1999. 10(d) Olin Senior Executive Pension Plan with amendments. 10(e) Olin Supplemental Contributing Employee Ownership Plan, effective January 1, 1990 as amended and restated as of September 24, 1998. 10(h) Form of executive agreement between Olin and certain executive officers as amended December 10, 1998. 10(n) Amended and Restated 1997 Stock Plan for Non-Employee Directors as amended and restated effective as of February 8, 1999. 10(s) Olin Supplementary and Deferral Benefit Pension Plan. 10(v) Form of Employee Benefits Allocation Agreement between Olin Corporation and Arch Chemicals, Inc. 12. Computation of Ratio of Earnings to Fixed Charges (unaudited). 21. List of Subsidiaries. 23. Consent of KPMG LLP dated March 16, 1999. 27(a) Financial Data Schedule. 27(b) Restated Financial Data Schedule. 27(c) Restated Financial Data Schedule.
58 PRINTED ON RECYCLED PAPER EX-3.B 2 BY-LAWS OF OLIN Exhibit 3(b) - -------------------------------------------------------------------------------- BYLAWS OF OLIN CORPORATION As Amended Effective February 8, 1999 - -------------------------------------------------------------------------------- BY-LAWS of OLIN CORPORATION ----------------------------- ARTICLE I. MEETINGS OF SHAREHOLDERS. SECTION 1. Place of Meetings. All meetings of the shareholders of Olin ------------------ Corporation (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. 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, the President or the holders of a majority of the shares of the issued and outstanding stock of the Corporation entitled to vote at the meeting. 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; provided, however, that in the case of a special meeting of shareholders called by the shareholders, such notice shall be given at least fifty days before the date of the meeting. 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. 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 -2- 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. To be properly brought ----------------------------------- before a 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 or a special meeting called at the request of shareholders in accordance with these By-laws, properly brought before the meeting by a shareholder. In addition to any other applicable requirements, for business to be properly brought before a meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be given, either by personal delivery or by United States registered or certified mail, postage prepaid, to the Secretary of the Corporation in the case of an annual meeting, not later than 90 days before the anniversary of the immediately preceding annual meeting and in the case of a special meeting called at the request of shareholders, in accordance with the procedures set forth in Section 10 of Article I of these By-laws. A shareholder's notice to the Secretary shall set forth as to -3- each matter the shareholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the meeting, including the complete text of any resolutions to be presented at the meeting with respect to such business, and the reasons for conducting such business at the meeting, (ii) the name and address of record of the shareholder proposing such business, (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, and (iv) 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 foregoing procedure, the chairman of the meeting may declare to the meeting that the business was not properly brought before the meeting and, if he shall so declare, such business shall not be transacted. SECTION 10. Special Meeting at Request of Shareholders. ------------------------------------------- (a) Any holder or holders of record of a majority of the outstanding shares of Common Stock requesting the Corporation to call a special meeting of shareholders pursuant to Section 2 of Article Eighth of the Restated Articles of Incorporation (collectively, the "Initiating Shareholder") shall give written notice of such request to the Secretary of the Corporation at its principal executive offices (the "Notice"). The Notice shall be sent in the manner and contain all the information that would be required in a notice to the Secretary given pursuant to Section 9 of this Article I. (b) If the Initiating Shareholder owns of record a majority of the outstanding Common Stock as determined by the Secretary of the Corporation, the Corporation shall be required to call the special meeting of shareholders requested by the Initiating Shareholder. (c) The record date for determining the shareholders of record entitled to vote at a special meeting called pursuant to this Section 10 shall be fixed by the Board of Directors which record date will be within 60 days of the date the Secretary of the Corporation determines the Corporation is required to call such special meeting. Written notice of the meeting shall be mailed by the Corporation to shareholders of record on such record date within 10 days after the record date (or such longer period as may be necessary for the Corporation to file its proxy materials with, and receive and respond to the comments of, the Securities and Exchange Commission), and the meeting will be held within 50 days after the date of mailing of the notice, as determined by the Board of Directors. (d) The business to be conducted at a special meeting called pursuant to this Section 10 shall be limited to the business set forth in the Notice and such other business or proposals as the Board of Directors shall determine and shall be set forth in the notice of meeting. The Board of Directors or the Chairman of the Board of Directors may determine other rules and procedures for the conduct of the meeting. ARTICLE II. BOARD OF DIRECTORS. -4- 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 eighteen directors, or decreased to any number, not less than three directors, by amendment of these Bylaws. No director need be a shareholder. The Board shall be divided into three classes, Class I, Class II and Class III, as nearly equal in number as possible, with the members of each class to serve for the respective terms of office provided in the Articles, and until their respective successors shall have been duly elected or until death or resignation or until removal in the manner hereinafter provided. In case the number of directors shall be increased, the additional directors to fill the vacancies caused by such increase shall be elected in accordance with the provisions of Section 4 of Article VI of these By-laws. Any increase or decrease in the number of directors shall be so apportioned among the classes by the Board as to make all classes as nearly equal in number as possible. 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. However, any shareholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if it is an annual meeting and written notice of such shareholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States registered or certified mail, postage prepaid, to the Secretary of the Corporation not later than 90 days before the anniversary of the immediately preceding annual meeting. Each such notice shall set forth: (a) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the shareholder is a holder of record of shares of the Corporation entitled to vote at such meeting (stating the class and number thereof) and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) 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 (d) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed 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 serve as a director of the Corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination by a shareholder of any person that is not made in compliance with the foregoing procedure. 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 -5- reimbursements for the reasonable expenses incurred by him in connection with the performance of his duties. Nothing contained herein shall preclude any director from serving the Corporation, or any subsidiary or affiliated corporation, in any other capacity and receiving proper compensation therefor. If the Board adopts a resolution to that effect, any director may elect to defer all or any part of the annual and other fees hereinabove referred to for such period and on such terms and conditions as shall be permitted by such resolution. SECTION 3. Place of Meetings. The Board may hold its meetings at such ------------------ place or places within or without the Commonwealth of Virginia as it may from time to time by resolution determine or as shall be specified or fixed in the respective notices or waivers of notice thereof. SECTION 4. Organization Meeting. After each annual election of directors, --------------------- 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 By-laws 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 By-laws. 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. Anything in these By-laws or in ------------------------------ any resolution adopted by the Board to the contrary notwithstanding, notice of any meeting of -6- the Board need not be given to any director if such notice shall be waived in writing signed by such director before, at or after the meeting, or if such director shall be present at the meeting. Any meeting of the Board shall be a legal meeting without any notice having been given or regardless of the giving of any notice or the adoption of any resolution in reference thereto, if every member of the Board shall be present thereat. Except as otherwise provided by law or these By-laws, 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. INDEMNIFICATION AND LIMIT ON LIABILITY. (a) 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), civil or criminal, 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 shall have been incurred, unless such person engaged in willful misconduct or a knowing violation of the criminal law. As used in this Article III: (i) 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; (ii) the terms "director," "officer" and "employee," unless the context otherwise requires, include the estate or personal representative of any such person; (iii) 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 -7- participants in or beneficiaries of the plan; (iv) the term "occurrence" means any act or failure to act, actual or alleged, giving rise to a claim, action or proceeding; and (v) service as a trustee or as a member of a management or similar committee of a partnership or joint venture shall be considered service as a director, officer or employee of the trust, partnership or joint venture. 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 (a). 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 (a) have not been met. (b) Any indemnification under paragraph (a) of this Article shall be made unless (i) 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 (a), or (ii) 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. (c) Expenses incurred with respect to any claim, action or proceeding of the character described in paragraph (a) shall, except as otherwise set forth in this paragraph (c), 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 III. No security shall be required for such undertaking and such undertaking shall be accepted without reference to the recipient's financial 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 (b), the Board or Virginia legal counsel, as the case may be, acting in accordance with the procedures set forth in paragraph (b), 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 (a). (d) No amendment or repeal of this Article III shall adversely affect or deny to any director, officer or employee the rights of indemnification provided in this Article III 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 takes place before or while this Article III, as adopted by the shareholders of the Corporation at the 1986 Annual Meeting of the Corporation, is in effect. The provisions of this paragraph (d) shall apply to -8- any such claim, action or proceeding whenever commenced, including any such claim, action or proceeding commenced after any amendment or repeal to this Article III. (e) The rights of indemnification provided in this Article III 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. (f) 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 III, 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. (g) An amendment to this Article III shall be approved only by a majority of the votes entitled to be cast by each voting group entitled to vote thereon. ARTICLE IV. 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 By-laws, 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 -9- (including, without limitation, all the power and authority of the Board in the management, control and direction of the financial affairs of the Corporation) except with respect to those matters reserved to the Board by Virginia law, in such manner as the Executive and Finance Committee shall deem best for the interests of the Corporation, in all cases in which specific directions shall not have been given by the Board. SECTION 2. Other Committees. To the extent permitted by law, the Board may ----------------- from time to time by resolution adopted by a majority of the number of directors fixed by these By-laws 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 V. 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 By- laws. 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 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 shall perform such other duties and exercise such other powers as may from time to time be prescribed by the Board or, if he shall not be the Chief Executive Officer, by the Chief Executive Officer. -10- 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 shall not be the Chief Executive Officer, by the Chief Executive Officer. SECTION 5. Vice Presidents. Each Vice President shall have such powers and ---------------- perform such duties as may from time to time be prescribed by the Board, the Chief Executive Officer or any officer to whom the Chief Executive Officer may have delegated such authority. SECTION 6. Treasurer. The Treasurer shall have the general care and ---------- custody of the funds and securities of the Corporation. He 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 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 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 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 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 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 shall attend to the giving and serving of notices of all meetings thereof. He 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 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. -11- ARTICLE VI. REMOVALS, RESIGNATIONS AND VACANCIES. SECTION 1. Removal of Directors. Any director may be removed at any time --------------------- but only with cause, by the affirmative vote of the holders of record of a majority of the shares of the Corporation entitled to vote on the election of directors, taken at an annual meeting of the shareholders. SECTION 2. Removal of Officers. Any officer, assistant officer or agent of -------------------- the Corporation may be removed at any time, either with or without cause, by the Board in its absolute discretion. Any such removal shall be without prejudice to the recovery of damages for breach of the contract rights, if any, of the officer, assistant officer or agent removed. Election or appointment of an officer, assistant officer or agent shall not of itself create contract rights. SECTION 3. 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 4. Vacancies. Any vacancy in the Board caused by death, ---------- resignation, disqualification, removal, an increase in the number of directors, or any other cause, may be filled (a) by the holders of shares of the Corporation entitled to vote on the election of directors, but only at an annual meeting of shareholders, or (b) by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board at any regular or special meeting thereof. Each director so elected by the Board shall hold office until the next annual election of directors, and each director so elected by the shareholders shall hold office for a term expiring at the annual meeting of shareholders at which the term of the class to which he has been elected expires, and, in each case, until his successor shall be elected, or until his death, or until he shall resign, or until he shall have been removed in the manner hereinabove provided. 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. -12- ARTICLE VII. CONTRACTS, LOANS, CHECKS, DRAFTS, DEPOSITS, ETC. SECTION 1. Execution of Contracts. Except as otherwise provided by law or ----------------------- by these By-laws, the Board (i) may authorize any officer, employee or agent of the Corporation to execute and deliver any contract, agreement or other instrument in writing in the name and on behalf of the Corporation, and (ii) may authorize any officer, employee or agent of the Corporation so authorized by the Board to delegate such authority by written instrument to other officers, employees or agents of the Corporation. Any such authorization by the Board may be general or specific and shall be subject to such limitations and restrictions as may be imposed by the Board. Any such delegation of authority by an officer, employee or agent may be general or specific, may authorize re-delegation, and shall be subject to such limitations and restrictions as may be imposed in the written instrument of delegation by the person making such delegation. SECTION 2. Loans. No loans shall be contracted on behalf of the ------ Corporation and no negotiable paper shall be issued in its name unless authorized by the Board. When authorized by the Board, any officer, employee or agent of the Corporation may effect loans and advances at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other certificates or evidences of indebtedness of the Corporation and when so authorized may pledge, hypothecate or transfer any securities or other property of the Corporation as security for any such loans or advances. Such authority may be general or confined to specific instances. SECTION 3. Checks, Drafts, etc. All checks, drafts and other orders for -------------------- the payment of money out of the funds of the Corporation and all notes or other evidences of indebtedness of the Corporation shall be signed on behalf of the Corporation in such manner as shall from time to time be determined by the Board. SECTION 4. Deposits. All funds of the Corporation not otherwise employed --------- shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board may select or as may be selected by the Treasurer or any other officer, employee or agent of the Corporation to whom such power may from time to time be delegated by the Board. SECTION 5. Voting of Securities. Unless otherwise provided by the Board, --------------------- the Chief Executive Officer may from time to time appoint an attorney or attorneys, or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes 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 -13- 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 VIII. CAPITAL STOCK. SECTION 1. Certificates. Every shareholder shall be entitled to a ------------- certificate, or certificates, in such form as shall be approved by the Board, signed by the Chairman of the Board, the President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer or any other officer authorized by these By-laws or a resolution of the Board, certifying the number of shares owned by him in the Corporation. Any such certificate may, but need not, bear the seal of the Corporation or a facsimile thereof. If any such certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation or an employee of the Corporation, the signatures of any of the officers above specified upon such certificate may be facsimiles. In case any such officer who shall have signed or whose facsimile signature shall have been placed upon such certificate shall have ceased to be such before such certificate is issued, it may be issued by the Corporation with the same effect as if such officer had not ceased to be such at the date of its issue. SECTION 2. Transfers. 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. 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. The Board may also make such additional rules and regulations as it may deem expedient concerning the issue and transfer of certificates representing shares of the capital stock of the Corporation. SECTION 3. 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 -14- 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 4. 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 5. Control Share Acquisitions. Article 14.1 of Chapter 9 of Title --------------------------- 13.1 of the Code of Virginia shall not apply to acquisitions of shares of the Corporation. ARTICLE IX. 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 By-laws or authorized by the Board. ARTICLE X. 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 XI. SEAL. The seal of the Corporation shall be circular in form and shall bear the name of the Corporation and the year "1892." -15- ARTICLE XII. FISCAL YEAR. The fiscal year of the Corporation shall end on the 31st day of December in each year. ARTICLE XIII. AMENDMENTS. The By-laws of the Corporation may be altered, amended or repealed and new By-laws may be adopted by the Board (except as Section 1 of Article II may otherwise require), or by the holders of the outstanding shares of the Corporation entitled to vote generally at any annual or special meeting of the shareholders when notice thereof shall have been given in the notice of the meeting of shareholders. EMERGENCY BY-LAWS. SECTION 1. Definitions. As used in these Emergency By-laws, ------------ (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 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 By-laws, as from time to time -------------- amended, shall be operative only during any period of emergency. To the extent not inconsistent with these Emergency By-laws, all provisions of the regular By- laws 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 By-laws. 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 -16- 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 By-laws 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. SECTION 4. Appointment of Officers. In addition to the Board's powers under ------------------------ the regular By-laws 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 By-laws 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 By- laws may make any further or different provision that may be practical and necessary for the circumstances of the emergency. -17- EX-4.E 3 AMENDED AND RESTATED CREDIT AGREEMENT EXHIBIT 4(e) CONFORMED COPY U.S. $165,000,000 AMENDED AND RESTATED CREDIT AGREEMENT Dated as of September 30, 1993 Amended and Restated as of February 22, 1999 Among OLIN CORPORATION as Borrower -- -------- and THE BANKS NAMED HEREIN as Banks -- ----- TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms............................. 1 SECTION 1.02. Computation of Time Periods....................... 21 SECTION 1.03. Accounting Terms.................................. 21 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The A Advances.................................... 22 SECTION 2.02. Making the Advances............................... 22 SECTION 2.03. Facility Fee...................................... 30 SECTION 2.04. Reduction and Extension of the Commitments/Substitution of Banks........................................... 30 SECTION 2.05. Repayment......................................... 32 SECTION 2.06. Interest.......................................... 32 SECTION 2.07. Additional Interest on Eurodollar Rate Advances................................... 33 SECTION 2.08. Interest Rate Determination....................... 34 SECTION 2.09. Prepayments....................................... 34 SECTION 2.10. Increased Costs................................... 35 SECTION 2.11. Payments and Computations......................... 37 SECTION 2.12. A Notes........................................... 38 SECTION 2.13. Sharing of Payments, Etc.......................... 38 SECTION 2.14. Taxes............................................. 39 SECTION 2.15. Interest Elections................................ 41 ARTICLE III CONDITIONS OF LENDING SECTION 3.01. Condition Precedent to' Restatement.......................................42 SECTION 3.02. [Intentionally left blank]..........................43 SECTION 3.03. Conditions Precedent to Each Borrowing Increasing the Aggregate Amount of Advances.............................. 43 SECTION 3.04. Conditions Precedent to Each B Borrowing.........................................44 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower................................. 45 ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants............................. 48 SECTION 5.02. Negative Covenants................................ 50 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default................................. 55 ARTICLE VII ASSIGNMENTS AND PARTICIPATIONS SECTION 7.01. Binding Effect.................................... 58 SECTION 7.02. Assignments....................................... 58 SECTION 7.03. Participations.................................... 60 SECTION 7.04. Information....................................... 61 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc................................... 61 SECTION 8.02. Notices, Etc...................................... 62 SECTION 8.03. No Waiver; Remedies............................... 62 SECTION 8.04. Costs, Expenses and Taxes......................... 62 SECTION 8.05. [Intentionally left blank.]....................... 63 SECTION 8.06. Lender's Credit Decision.......................... 63 SECTION 8.07. Lender and Affiliates............................. 63 SECTION 8.08. Indemnification by Borrower....................... 63 SECTION 8.09. Governing Law..................................... 64 SECTION 8.10. Execution in Counterparts......................... 64 SECTION 8.11. Special Prepayment Right.......................... 64 Schedule I - List of Applicable Lending Offices Exhibit A-1 - A Promissory Note Exhibit A-2 - Form of B Note Exhibit B-1 - Notice of A Borrowing Exhibit B-2 - Notice of B Borrowing Exhibit C - Assignment and Acceptance Exhibit D - Opinion of Counsel to the Borrower Exhibit E - Assumption Agreement AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 30, 1993, as amended and restated as of February 22, 1999, among OLIN CORPORATION, a Virginia corporation (the "Borrower"), and the banks (the "Banks") listed on the signature pages hereof. The Borrower and the Banks are parties to the Credit Agreement dated as of September 30, 1993 as amended from time to time prior to the date hereof (the "Existing Credit Agreement"). The Borrower has requested that the Existing Credit Agreement be amended to effect certain changes thereto. The undersigned Banks are willing to amend the Existing Credit Agreement and to restate the Existing Credit Agreement as so amended in the form hereof, subject to the terms and conditions hereinafter set forth. The parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. 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): "A Advance" means an advance (other than a B Advance) by a Lender to --------- the Borrower pursuant to Section 2.02(a), and refers to an Adjusted CD Rate Advance, a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a "Type" of A Advance). "A Borrowing" means a borrowing consisting of A Advances of the same ----------- Type made on the same day by the Lenders. "Acquisition" means any acquisition by the Borrower or any of its ----------- Subsidiaries of all or substantially all of the capital stock of, or all or a substantial part of the assets of, or of a business unit or division of, any Person. "A Note" means a promissory note of the Borrower payable to the order ------ of any Lender, in substantially the form of Exhibit A-1 hereto, evidencing the 2 aggregate Indebtedness of the Borrower to such Lender resulting from the A Advances made by such Lender. "Adjusted CD Rate" means, for the Interest Period for each Adjusted CD ---------------- Rate Advance comprising part of the same Borrowing, an interest rate per annum equal to the sum of: (a) the rate per annum obtained by dividing (i) the rate of interest determined by the Majority Lenders to be the average (rounded upward to the nearest whole multiple of 1/100 of 1% per annum, if such average is not such a multiple) of the consensus bid rate determined by each of the Reference Banks for the bid rates per annum, at 9:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period, of New York certificate of deposit dealers of recognized standing selected by each Reference Bank for the purchase at face value of certificates of deposit of such Reference Bank in an amount substantially equal to such Reference Bank's Adjusted CD Rate Advance comprising part of such Borrowing and with a maturity equal to such Interest Period (provided that if such quotations from such dealers are not available to any Reference Bank, such Reference Bank shall determine a reasonably equivalent rate on the basis of another customary source or sources selected by it), by (ii) a percentage equal to 100% minus the Adjusted CD Rate Reserve Percentage (as defined below) for such Interest Period, plus (b) the Assessment Rate (as defined below) for such Interest Period. The "Adjusted CD Rate Reserve Percentage" for the Interest Period for each ----------------------------------- Adjusted CD Rate Advance comprising part of the same A Borrowing means the reserve percentage applicable on the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with deposits exceeding one billion dollars with respect to liabilities consisting of or including (among other liabilities) U.S. dollar nonpersonal time deposits in the United States with a maturity equal to such Interest Period. The 3 "Assessment Rate" for the Interest Period for each Adjusted CD Rate Advance comprising part of the same A Borrowing means the annual assessment rate estimated (in good faith) by the Majority Lenders on the first day of such Interest Period for determining the then current annual assessment payable by Citibank, N.A. to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. dollar deposits of Citibank, N.A. in the United States. The Adjusted CD Rate for the Interest Period for each Adjusted CD Rate Advance comprising part of the same A Borrowing shall be determined by the Majority Lenders on the basis of applicable rates furnished to and received by the Majority Banks from the Reference Banks on the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "Adjusted CD Rate Advance" means an A Advance which bears interest as ------------------------ provided in Section 2.06(b). "Advance" means an A Advance or a B Advance. ------- "Affiliate" means, when used with respect to a Lender, any Person --------- directly or indirectly controlling, controlled by or under common control with such Lender. The term "control (including the terms "controlled by" or "under common control with") means the possession directly or indirectly of the power, whether or not exercised, to direct or cause the direction of the management and policies of any Person, whether through ownership of voting securities or by contract or otherwise. "Applicable Lending Office" means, with respect to each Lender, such ------------------------- Lender's Domestic Lending Office in the case of a Base Rate Advance, such Lender's CD Lending Office in the case of an Adjusted CD Rate Advance, and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance. "Applicable Margin" means, as determined on the date the Adjusted CD ----------------- Rate or Eurodollar Rate, as the case may be, is determined, when the Ratings are as set forth below, the rate per annum set forth below opposite such Ratings: Applicable Applicable Ratings Eurodollar C/D Rate Moody's S&P Margin Margin ----------- ----- ----------- --------- If the Borrower has a Moody's or S&P rating which is greater than or 4 equal to any one of: Category 1 A3 or A- .12% .245% - ---------- If the Borrower has a Moody's or S&P rating which is equal to any one of: Category 2 Baal or BBB+ .16% .285% - ---------- Category 3 Baa2 or BBB .20% .325% - ---------- Category 4 Baa3 or BBB- .25% .375% - ---------- Any other Rating lower than those set forth above: Category 5 .32% .445% - ---------- For purposes of the foregoing, if the Ratings established or deemed to have been established by Moody's and S&P shall fall within different categories, the Applicable Margin shall be based on (A) if the Ratings are in adjacent categories, the higher of the two Ratings and (B) if the Ratings are in non-adjacent categories, the Rating immediately below the higher of the two Ratings. If the rating system of Moody's or S&P shall change, or if any such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the non-availability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Margin shall be determined using the rating of such rating agency most recently in effect prior to such change or cessation. "Assignment and Acceptance" means an assignment and acceptance entered ------------------------- into by a Lender and an assignee in substantially the form of Exhibit C hereto and otherwise in accordance with Article VII. "B Advance" means an advance by a Lender to the Borrower pursuant to --------- the auction bidding procedure described in Section 2.02(b). "B Borrowing" means a borrowing consisting of simultaneous B Advances ----------- from each of the Lenders whose offer to make such B Advances has been accepted under 5 the auction bidding procedure described in Section 2.02(b). "B Note" means a promissory note of the Borrower payable to the order ------ of any Lender, in substantially the form of Exhibit A-2 hereto, evidencing the Indebtedness of the Borrower to such Lender resulting from a B Advance made by such Lender. "B Reduction" means, for each Lender at any time, such Lender's ----------- ratable portion (determined according to such Lender's respective Commitments) of the aggregate principal amount of all B Advances then outstanding. "Base Rate" means, for any Interest Period or any other period, a --------- fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the higher of: (a) The rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.'s base rate, or (b) The sum (adjusted to the nearest 1/100 of one percent or, if there is no nearest 1/100 of one percent, to the next higher 1/100 of one percent) of (i) 1/2 of one percent per annum, plus (ii) the rate per annum obtained by dividing (A) the Federal Funds Rate by (B) a percentage equal to 100% minus the average of the daily percentages specified during such period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for Citibank, N.A. in respect of liabilities consisting of or including (among other liabilities) three-month U.S. dollar nonpersonal time deposits in the United States, plus (iii) the average during such period of the annual assessment rates estimated by Citibank, N.A. for determining the then current annual assessment payable by Citibank, N.A. to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. dollar deposits of Citibank, N.A. in the United States. "Base Rate Advance" means an A Advance which bears interest as ----------------- provided in Section 2.06(a). "Business Day" means a day of the year on which banks are not required ------------ or authorized to close in New 6 York City and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. "Capital Lease Obligations" of any Person means the obligations of ------------------------- such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "CD Lending Office" means, with respect to any Lender, the office of ----------------- such Lender specified as its "CD Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower. "Commitment" has the meaning specified in Section 2.01. ---------- "Consolidated EBITDA" means, for any period, Consolidated Net Income ------------------- for such period (adjusted to exclude all extraordinary or unusual items and any gains or losses on sales of assets outside the ordinary course of business) plus, without duplication and to the extent deducted in ---- calculating such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt discount with respect to Indebtedness (including the Advances), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, and (e) any other non-cash charges. For the purposes of calculating Consolidated EBITDA for any Reference Period pursuant to any determination of the Consolidated Leverage Ratio or Consolidated Interest Coverage Ratio, if during such Reference Period the Borrower or any Subsidiary shall have made an Acquisition, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto and any Indebtedness --- ----- incurred or assumed in connection therewith as if such Acquisition occurred and such Indebtedness had been incurred or assumed on the first day of such Reference Period. 7 "Consolidated Interest Coverage Ratio" means, for any Reference ------------------------------------ Period, the ratio of (a) Consolidated EBITDA for such Reference Period to (b) Consolidated Interest Expense for such Reference Period. "Consolidated Interest Expense" means, for any period, total cash ----------------------------- interest expense (including that attributable to capitalized lease obligations) of the Borrower and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries (including all commission, discounts and other fees and charges accrued with respect to letters of credit and bankers' acceptance financing allocable to such period in accordance with GAAP), minus (in the case of net benefits) or plus (in the case of net costs) the net benefits or net costs under all Hedging Agreements in respect of Indebtedness of the Borrower and its Subsidiaries to the extent such net benefits or net costs are allocable to such period in accordance with GAAP. For the purposes of calculating Consolidated Interest Expense for any Reference Period pursuant to any determination of the Consolidated Interest Coverage Ratio, if during such Reference Period the Borrower or any Subsidiary shall have made an Acquisition, Consolidated Interest Expense for such Reference Period shall be calculated after giving pro forma effect thereto and any Indebtedness --- ----- incurred or assumed in connection therewith as if such Acquisition occurred and such Indebtedness had been incurred or assumed on the first day of such Reference Period. "Consolidated Leverage Ratio" means, as at the last day of any --------------------------- Reference Period, the ratio of (a) Consolidated Total Debt on such date to (b) Consolidated EBITDA for such Reference Period. "Consolidated Net Income" means, for any period, the consolidated net ----------------------- income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be -------- excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of the Borrower) in which the Borrower or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of the 8 Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or any law applicable to such Subsidiary. "Consolidated Net Tangible Assets" means, at any date, the total -------------------------------- assets of the Borrower and its Subsidiaries at such date, determined on a consolidated basis, minus (a) the consolidated current liabilities of the Borrower and its Subsidiaries as of such date, (b) unamortized debt discount and expense, goodwill, trademarks, brand names, patents and other intangible assets, and (c) any write-up of the value of any assets (other than an allocation of purchase price in an acquisition) after December 31, 1997; all as determined in accordance with GAAP. "Consolidated Total Debt" means, at any date, the aggregate principal ----------------------- amount of all Indebtedness of the Borrower and its Subsidiaries at such date other than Excluded Sunbelt Debt, determined on a consolidated basis in accordance with GAAP. "Contractual Obligation" means, as to any ---------------------- Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Domestic Lending Office" means, with respect to any Lender, the ----------------------- office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower. "Domestic Subsidiary" shall mean any Subsidiary organized under the ------------------- laws of any State of the United States of America, substantially all of the assets of which are located, and substantially all of the business of which is conducted, in the United States of America. "Environmental Laws" means any and all federal, state, local and ------------------ foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, injunctions, permits, concessions, grants, franchises, licenses or governmental restrictions relating to the effect of the environment on human health, the environment or to emissions, 9 discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "Eligible Assignee" means (i) a commercial bank organized under the ----------------- laws of the United States, or any State thereof, and having total assets in excess of $1,000,000,000 and a combined capital and surplus of at least $500,000,000; (ii) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, having total assets in excess of $500,000,000, and having shareholders equity in excess of $100,000,000; (iii) a commercial bank organized under the laws of any other country which is a member of the OECD, or a political subdivision of any such country, and having total assets in excess of $1,000,000,000, provided that such bank is acting through a branch or agency located in the United States; and (iv) the central bank of any country which is a member of the OECD. "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means any Person who for purposes of Title IV of --------------- ERISA is a member of the Borrower's controlled group, or under common control with the Borrower, within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Event" means (i) the occurrence of a reportable event, within ----------- the meaning of Section 4043 of ERISA, unless the 30-day notice requirement with respect thereto has been waived by the PBGC; (ii) the provision by the administrator of any Plan of a notice of intent to terminate such Plan, pursuant to Section 4041(a) (2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (iii) the cessation of operations at a facility in the circumstances described in Section 4068(f) of ERISA; (iv) the withdrawal by the Borrower or an ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial 10 employer, as defined in Section 4001(a)(2) of ERISA; (v) the failure by the Borrower or any ERISA Affiliate to make a payment to a Plan required under Section 302(f)(1) of ERISA, which Section imposes a lien for failure to make required payments; (vi) the adoption of an amendment to a Plan requiring the provision of security to such Plan, pursuant to Section 307 of ERISA; or (vii) the institution by the PBGC of proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or the occurrence of any event or condition which would constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, a Plan. "Eurocurrency Liabilities" has the meaning assigned to that term in ------------------------ Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Lending Office" means, with respect to any Lender, the ------------------------- office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower. "Eurodollar Rate" means, for the Interest Period for each Eurodollar --------------- Rate Advance comprising part of the same A Borrowing and each B Advance comprising part of the same B Borrowing, an interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 10:00 A.M. (New York time) two Business Days before the first day of such Interest Period or, in the case of a B Advance, two Business Days before the date of such B Borrowing in an amount substantially equal to such Reference Bank's Eurodollar Rate Advance comprising part of such A Borrowing or, in the case of a B Borrowing, in an amount substantially equal to one quarter of the aggregate amount of such B Borrowing and for a period equal to such Interest Period or, in the case of a B Advance, equal to the period from the date of such B Advance to its maturity date as specified in the applicable Notice of B Borrowing. The Eurodollar Rate for such period for each such Advance comprising part of the same A Borrowing or B Borrowing (as 11 applicable) shall be such average as determined by the Majority Lenders on the basis of applicable rates furnished to and received by the Majority Lenders from the Reference Banks two Business Days before the first day of such Interest Period or, in the case of a B Advance, two Business Days before the date of such B Borrowing, subject, however, to the provisions of Section 2.08. "Eurodollar Rate Advance" means an A Advance which bears interest as ----------------------- provided in Section 2.06(c). "Eurodollar Rate Reserve Percentage" of any Lender for the Interest ---------------------------------- Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. "Events of Default" has the meaning specified in Section 6.01. ----------------- "Excluded Sunbelt Debt" means 66__% of the --------------------- Borrower's Indebtedness in respect of its Guarantee of the Guaranteed Secured Senior Notes due 2017, Series O, of Sunbelt Chlor Alkali Partnership. "Existing Credit Agreement" is defined in the ------------------------- preamble of this Agreement. "Facility Fee Rate" means with respect to each day when the Ratings ----------------- are as set forth below, the rate per annum set forth below opposite such Ratings: Ratings Moody's S&P Facility Fee Rate ------- --- ----------------- If the Borrower has a Moody's or 12 Ratings Moody's S&P Facility Fee Rate ------- --- ----------------- S&P rating which is greater than or equal to any one of: Category 1 - ---------- A3 or A- .08% If the Borrower has a Moody's or S&P rating which is equal to any one of: Category 2 Baa1 BBB+ .09% - ---------- Category 3 Baa2 BBB .10% - ---------- Category 4 Baa3 BBB- .12% - ---------- Any other Rating lower than those set forth above: Category 5 .18% - ---------- For purposes of the foregoing, if the Ratings established or deemed to have been established by Moody's and S&P shall fall within different categories, the Facility Fee Rate shall be based on (A) if the Ratings are in adjacent categories, the higher of the two Ratings and (B) if the Ratings are in non-adjacent categories, the Rating immediately below the higher of the two Ratings. If the rating system of Moody's or S&P shall change, or if any such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the non-availability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Facility Fee Rate shall be determined using the rating of such rating agency most recently in effect prior to such change or cessation. 13 "Federal Funds Rate" means, for any period, a fluctuating interest ------------------ rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published in Federal Reserve Statistical Release H.15(519), for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Majority Banks from three Federal funds brokers of recognized standing selected by them. "Foreign Subsidiary" shall mean any Subsidiary other than a Domestic ------------------ Subsidiary. "GAAP" is defined in Section 1.03. ---- "Guarantee" of or by any Person (the "guarantor") means any --------- --------- obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor"") in any manner, --------------- whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall -------- not include endorsements for collection or deposit in the ordinary course of business. "Hazardous Substances" means any toxic, radioactive, caustic or -------------------- otherwise hazardous substance, including petroleum, its derivatives, by- products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing 14 characteristics, in each case regulated by an Environmental Law. "Hedging Agreement" means any interest rate protection agreement, ----------------- foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. "Indebtedness" of any Person means, without duplication, (a) all ------------ obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, other than letters of credit and letters of guaranty issued to support obligations (other than Indebtedness) incurred in the ordinary course of business, and (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefore as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Insufficiency" means, with respect to any Plan, the amount, if any, ------------- of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. 15 "Interest Election Request" means a request by the Borrower to ------------------------- convert or continue an A Borrowing in accordance with Section 2.15. "Interest Period" means, for each A Advance comprising part of the --------------- same A Borrowing, the period commencing on the date of such A Advance (or on the effective date of any election applicable to such A Borrowing pursuant to Section 2.15) and ending the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be (a) in the case of a Base Rate Advance, up to 180 days, (b) in the case of an Adjusted CD Rate Advance, 30, 60, 90 or 180 days and (c) in the case of a Eurodollar Rate Advance, 1, 2, 3 or 6 months, in each case as the Borrower may select, upon notice received by the Lenders not later than 11:00 A.M. (New York City time) on (i) the third Business Day prior to the first day of such Interest Period in the case of Eurodollar Rate Advances, (ii) the Business Day prior to the first day of such Interest Period in the case of Adjusted CD Rate Advances and (iii) the first day of such Interest Period in the case of Base Rate Advances; provided, however, that: (A) the Borrower may not select any Interest Period which ends after the Termination Date; (B) Interest Periods commencing on the same date for A Advances comprising part of the same Borrowing shall be of the same duration; and (C) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day on such Interest Period shall be extended to occur on the next succeeding Business Day, provided, in the case of any Interest Period for a Eurodollar Rate Advance, that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day. "Lenders" means the Banks listed on the signature pages hereof (until ------- such Bank shall have assigned or had assumed all interests hereunder as provided in Sections 7.02(a) or 2.04(c)) and each assignee or Assuming Bank that shall become a party hereto pursuant to Sections 7.02(a) or 2.04(c). 16 "Lien" means any mortgage, pledge, security interest, encumbrance, ---- lien or charge of any kind (including any conditional sale or other title retention agreement, and the filing of any financing statement under the Uniform Commercial Code of any jurisdiction). "Margin Stock" shall have the meaning given such term under Regulation ------------ U issued by the Board of Governors of the Federal Reserve System. "Majority Lenders" means at any time Lenders owed at least 51% of the ---------------- then aggregate unpaid principal amount of the A Advances owing to Lenders, or, if no such principal amount is then outstanding, Lenders having at least 51% of the Commitments. "Multiemployer Plan" means a multiemployer plan, as defined in Section ------------------ 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions, such plan being maintained pursuant to one or more collective bargaining agreements. "Multiple Employer Plan" means a single employer plan, as defined in ---------------------- Section 4001(a)(15) of ERISA, which (i) is maintained for employees of the Borrower or an ERISA Affiliate and at least one Person other than the Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "Note" means an A Note or a B Note. ---- "Notice of A Borrowing" has the meaning specified in Section 2.02. --------------------- "Notice of B Borrowing" has the meaning specified in Section --------------------- 2.02(b)(i). "OECD" means the Organization for Economic Cooperation and ---- Development. "Officer's Certificate" means a certificate signed in the name of the --------------------- Borrower by its President, one of its Vice Presidents, its Treasurer or its Controller. 17 "PBGC" means the Pension Benefit Guaranty Corporation. ---- "Permitted Encumbrances" means: ---------------------- (a) Liens imposed by law for taxes that are not yet due or are being contested in good faith by appropriate proceedings; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in good faith by appropriate proceedings; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) judgment liens in respect of judgments that do not constitute an Event of Default under Section 6.01(f); and (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary; provided that the term "Permitted Encumbrances" shall not include any Lien -------- securing Indebtedness. "Person" means an individual, partnership, corporation (including a ------ business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. ---- 18 "Rating" means the senior unsecured debt rating of the Borrower (or ------ its status as unrated) from time to time in effect from Standard and Poors Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's"), as the case may be. "Reference Banks" means The Chase Manhattan Bank and Citibank, N.A. --------------- "Reference Period" means any period of four consecutive fiscal ---------------- quarters of the Borrower. "Significant Subsidiary" means each Subsidiary, but excludes any ---------------------- Foreign Subsidiary the United States dollar value (or equivalent thereof) of whose assets is less than 5% of the total assets of the Borrower and the Subsidiaries, on a consolidated basis. "Single-Employer Plan" means a single employer plan, as defined in -------------------- Section 4001(a)(15) of ERISA, which (i) is maintained for employees of the Borrower or an ERISA Affiliate and no Person other than the Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Subsidiary" means, as at any particular time, any corporation ---------- included as a consolidated subsidiary of the Borrower in the financial statements contained in the most recent report filed by the Borrower with the Securities and Exchange Commission on Form 10-K pursuant to the Securities Exchange Act of 1934, provided that, under then current regulations of the Securities and Exchange Commission, such corporation may continue to be so included as a consolidated subsidiary of the Borrower in any such annual report thereafter filed by the Borrower with the Securities and Exchange Commission. "Tax-Exempt Financing" means a transaction with a governmental unit or -------------------- instrumentality which involves (i) the issuance by such governmental unit or instrumentality to Persons other than the Borrower or a Subsidiary of bonds or other obligations on which the interest is exempt from Federal income taxes under Section 103 of the Internal Revenue Code and the proceeds of which are applied to finance or refinance the cost of acquisition of equipment or facilities of the Borrower or any of its subsidiaries, and (ii) 19 participation in the transaction by the Borrower or a Subsidiary in any manner permitted by this Agreement. "Termination Date" means (i) October 15, 2002 or (ii) any date to ---------------- which the Termination Date shall have been extended pursuant to Section 2.04(b); provided in each case of (i) and (ii), the earlier date on which the termination in whole of the Commitments occurs pursuant to Section 2.04(a) or 6.01. "Type" shall have the meaning given such term in the definition of A ---- Advance. "Voting Rights" means, as to any corporation, ordinary voting power ------------- (whether associated with outstanding common stock or outstanding preferred stock, or both) to elect members of the Board of Directors of such corporation (irrespective of whether or not at the time capital stock of any class or classes of such corporation shall or might have voting power or additional voting power upon the occurrence of any contingency). "Wholly Owned" means, with respect to any corporation, a corporation ------------ of which 100% of the Voting Rights are at the time directly or indirectly owned by the Borrower, by the Borrower and one or more other Wholly Owned Subsidiaries, or by one or more other Wholly Owned Subsidiaries. "Withdrawal Liability" shall have the meaning given such term under -------------------- Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Computation of Time Periods. (a) In this Agreement and --------------------------- the Notes in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding". (b) In this Agreement and the Notes each reference to a year shall be a reference to the twelve consecutive months beginning January 1 in such year and ending December 31 in such year and each reference to a quarter shall be a reference to one of the three consecutive month periods beginning January 1, April 1, July 1 or October 1, in each year. SECTION 1.03. Accounting Terms. All accounting terms not ---------------- specifically defined herein shall be construed in accordance 20 with GAAP. GAAP shall mean generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the most recent certified consolidated financial statements of the Borrower and the Subsidiaries delivered to the Lenders, except that in the event that an accounting standard adopted by the Financial Accounting Standards Board requires recognition of a liability with respect to post retirement benefits other than pensions, the accruals which would otherwise be called for under such accounting standard shall be excluded in the calculations to be made under this Agreement. Disbursements with respect to post retirement benefits other than pensions shall be reflected in the calculations to be made under this Agreement. ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The A Advances. Each Lender severally agrees, on the -------------- terms and conditions hereinafter set forth, to make A Advances to the Borrower from time to time on any Business Day during the period from the date hereof until the Termination Date in an aggregate amount not to exceed at any time outstanding the amount set forth opposite such Lender's name on the signature pages hereof or on the Assumption Agreement or, if such Lender has entered into one or more Assignments and Acceptances, set forth in such Assignments and Acceptances, as such amount may be reduced pursuant to Section 2.04 (such Lender's "Commitment"); provided that the Commitment of each Lender shall be deemed used from time to time by the amount of such Lender's B Reduction. Each A Borrowing shall be in an aggregate amount not less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof and shall consist of A Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender's Commitment, the Borrower may borrow, repay pursuant to Section 2.05 or prepay pursuant to Section 2.09(b), and reborrow, prior to the Termination Date, under this Section 2.01. SECTION 2.02. Making the A Advances. (i) Each A Borrowing shall be --------------------- made on notice, given not later than 11:00 A.M. (New York City time) by the Borrower to the Lenders, (A) in the case of Adjusted CD Rate Advances, on the Business Day prior to the date of the proposed A Borrowing and (B) in the case of Eurodollar Rate Advances, on the third Business Day prior to the date of the proposed A Borrowing and (C) in the case of Base Rate Advances, on 21 the day of the proposed A Borrowing. Each such notice of an A Borrowing (a "Notice of A Borrowing") shall be by telephone, confirmed immediately in writing, in substantially the form of Exhibit B-1 hereto, specifying therein the requested (I) date of such A Borrowing, (II) Type of A Advances comprising such A Borrowing, (III) aggregate amount of such A Borrowing, and (IV) Interest Period for each such A Advance. In the case of a proposed A Borrowing comprised of Base Rate Advances, Adjusted CD Rate Advances or Eurodollar Rate Advances, the Borrower shall, as soon as possible, notify each Lender of the applicable interest rate under Section 2.06(a), (b) or (c) and, if the Majority Lenders disagree with the calculation of the interest rate so notified by the Borrower, the Majority Lenders shall promptly notify each other Lender and the Borrower of such applicable interest rate. Upon the fulfillment of the applicable conditions set forth in Article III, each Lender shall, before 2:00 P.M. (New York City time) on the date of such A Borrowing, make available to the Borrower such Lender's ratable portion of such A Borrowing, at the account of the Borrower with such Lender in New York, New York or, if no such account exists, by wire transfer to such account as shall be specified by the Borrower by notice to such Lender, in same day funds. The failure of any Lender to make the A Advance to be made by it as part of any A Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its A Advance on the date of such A Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the A Advance to be made by such other Lender on the date of any A Borrowing. (ii) Anything in subsection (i) above to the contrary notwithstanding, (A) if any Lender shall, at least one Business Day before the date of any requested A Borrowing, notify the Borrower that the introduction of or any change in or in the interpretation of any law or regulation by any court, authority or agency, or any other governmental, judicial or regulatory body, makes it unlawful, or that any central bank or other governmental authority asserts that it is unlawful, for such Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances hereunder, the right of the Borrower to select Eurodollar Rate Advances for such A Borrowing or any subsequent A Borrowing, with respect to such Lender (only), shall be suspended until such Lender shall notify the Borrower that the circumstances causing such 22 suspension no longer exist or such Lender shall cease to be a party hereto, and each A Advance comprising such A Borrowing shall, with respect to such Lender (only), be an Adjusted CD Rate Advance (or, if the Borrower so notifies such Lender within two hours of such Lender so notifying the Borrower, a Base Rate Advance) of an equivalent amount and for an approximately equivalent term, provided that if all the Lenders so notify -------- the Borrower, the Notice of A Borrowing in respect of such requested A Borrowing shall be automatically revoked. Each Lender giving a notice under this subclause (A) shall, promptly after giving such notice, provide the Borrower with an explanation, in reasonable detail, as to the circumstances causing such suspension; (B) if none of the Reference Banks furnish timely information to the Lenders for determining the Adjusted CD Rate for Adjusted CD Rate Advances, or the Eurodollar Rate for Eurodollar Rate Advances, comprising any requested A Borrowing, the right of the Borrower to select Adjusted CD Rate Advances or Eurodollar Rate Advances, as the case may be, for such A Borrowing or any subsequent A Borrowing shall be suspended until the Majority Lenders shall notify the Borrower and the other Lenders that the circumstances causing such suspension no longer exist, and each A Advance comprising such A Borrowing shall be an Adjusted CD Rate Advance or a Eurodollar Rate Advance, whichever is available (or, if neither is available or the Borrower so notifies the Lenders, a Base Rate Advance); and (C) if the Majority Lenders shall, at least one Business Day before the date of any requested A Borrowing, notify the Borrower that the Eurodollar Rate for Eurodollar Rate Advances comprising such A Borrowing will not adequately reflect the cost to the Lenders of making or funding their respective Eurodollar Rate Advances for such A Borrowing, the Notice of A Borrowing given in respect of such requested A Borrowing shall be automatically revoked and the right of the Borrower to select Eurodollar Rate Advances for such A Borrowing or any subsequent A Borrowing shall be suspended until the Majority Lenders shall notify the Borrower and the other Lenders that the circumstances causing such suspension no longer exist. The Majority Lenders giving a notice under this subclause (C) shall, promptly after giving such notice, provide the Borrower with an explanation, in reasonable detail, as to the circumstances causing such suspension. 23 (iii) Each Notice of A Borrowing (subject to (A) and (C) above) shall be irrevocable and binding on the Borrower. In the case of any A Borrowing which the related Notice of A Borrowing specifies is to be comprised of Adjusted CD Rate Advances or Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of A Borrowing for such A Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the A Advance to be made by such Lender as part of such A Borrowing when such A Advance, as a result of such failure, is not made on such date. Each Lender claiming indemnity for any such loss, cost or expense under this clause (iii) shall provide, at the time of making such claim, the Borrower with reasonable details, including the basis for the calculation thereof, of such loss, cost or expense, provided that, -------- in the absence of manifest error, the amount of such claims so notified shall be conclusive and binding upon the Borrower. (b) Making the B Advances. (i) Each Lender severally agrees that --------------------- the Borrower may make B Borrowings under this Section 2.02(b) from time to time on any Business Day during the period from the date hereof until the date occurring one day prior to the Termination Date in the manner set forth below; provided that, following the making of each B Borrowing, the aggregate amount of - -------- all Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders (after giving effect to each B Reduction). (A) The Borrower may request a B Borrowing under this Section 2.02(b) by delivering to the Lenders, by telephone, confirmed immediately in writing, a notice of a B Borrowing (a "Notice of B Borrowing"), in --------------------- substantially the form of Exhibit B-2 hereto, specifying (I) the date and aggregate amount of the proposed B Borrowing, (II) the type of interest rate applicable to such B Borrowing (which shall be a margin above or below the Eurodollar Rate or a fixed rate), (III) the interest period or periods applicable to such B Borrowing (which shall be up to 6 months in the case of Eurodollar Rate related B Borrowings and up to 180 days in the case of fixed rate B Borrowings), (IV) the maturity date for repayment of each B Advance to be made as part of such B Borrowing (which maturity date may not be later than the Termination Date), (V) the 24 interest payment date or dates relating thereto, (VI) the time after which the offer of any Lender bidding for such B Borrowing cannot be accepted by the Borrower (which shall not be later than 10:30 A.M., New York City time, on the date of the proposed B Borrowing in the case of a fixed rate B Borrowing and on the third Business Day prior to the date of the proposed B Borrowing in the case of a Eurodollar Rate B Borrowing), and (VII) any other terms to be applicable to such B Borrowing, not later than 9:00 A.M. (New York City time) (x) on or before the date of the proposed B Borrowing if the Borrower shall specify in the Notice of B Borrowing that the rates of interest to be offered by Lenders shall be fixed rates and (y) at least four Business Days prior to the proposed B Borrowing, if the Borrower shall instead specify in the Notice of B Borrowing that the rates to be offered by the Lenders shall be a margin above or below the Eurodollar Rate. (B) Each Lender shall, if, in its sole discretion, it elects to do so, irrevocably offer to make one or more B Advances to the Borrower as part of such proposed B Borrowing at a rate or rates of interest, with maturity date or dates, and with a maximum principal amount that may be accepted by the Borrower, each as specified by such Lender in its sole discretion, by notifying the Borrower by telephone before 9:30 A.M. (New York City time), confirmed in writing before 10:30 A.M. (New York City time), (I) on the date of such proposed B Borrowing, if the Borrower shall have specified in the Notice of B Borrowing that the rates of interest to be offered by the Lenders were to be fixed rates per annum and (II) on the third Business Day prior to the proposed B Borrowing, if the Borrower shall have instead specified in the Notice of B Borrowing that the rates of interest to be offered by the Lenders were to be Eurodollar Rates, of the maximum amount of each B Advance which such Lender would be willing to make as part of such proposed B Borrowing (which amounts may, subject to the proviso to the first sentence of this Section 2.02(b)(i), exceed such Lender's Commitment), the rate or rates of interest and maturity date or dates therefor and such Lender's Applicable Lending Office with respect to such B Advance. If any Lender shall elect not to make such an offer, such Lender shall so notify the Borrower by telephone, confirmed immediately in writing, before 9:30 A.M. (New York City time) on the date it would have been obliged to notify the Borrower of its offer, had it elected to make such offer and such Lender shall not be obligated to, and shall not, make any B Advance as part of such B Borrowing; provided that the failure -------- 25 by any Lender to give such notice shall not cause such Lender to be obligated to make any B Advance as part of such proposed B Borrowing. (C) The Borrower shall, in turn, not later than the time after which the Borrower cannot accept the bid of any Lender, as specified by the Borrower in the Notice of B Borrowing delivered by it in respect of such proposed B Borrowing, (I) on the date of such proposed B Borrowing, if the Borrower shall have specified in the Notice of B Borrowing that the rates of interest to be offered by the Lenders were to be fixed rates per annum and (II) on the third Business Day prior to the proposed B Borrowing, if the Borrower shall have instead specified in the Notice of B Borrowing that the rates of interest to be offered by the Lenders were to be Eurodollar Rates, either, (x) cancel such B Borrowing by giving the Lenders notice by telephone, confirmed immediately in writing, to that effect, or (y) accept one or more of the offers made by any Lender or Lenders pursuant to paragraph (B) above, in ascending order of the effective cost to the Borrower (and if two or more of such offers have an equal effective cost to the Borrower, the Borrower shall accept each such equal offer in the proportion that the amount of each such equal offer bears to the aggregate amount of all offers at such equal effective cost made by the Lenders making such equal offers), provided if the order referred to above would result in the acceptance of an offer by any Lender in an aggregate amount of less than $5,000,000, the Borrower shall accept such amounts as, in its discretion, it chooses to ensure that no offer of a Lender is accepted for an aggregate amount of less than $5,000,000; such acceptance shall be made by the Borrower giving notice by telephone, confirmed immediately in writing, to each Lender of the amount of each B Advance (which amount shall be equal to or less than the maximum amount notified to the Borrower by such Lender for such B Advance pursuant to paragraph (B) above) to be made by such Lender as part of such B Borrowing, and reject any remaining offers made by Lenders pursuant to paragraph (B) above by giving such Lenders notice to that effect. 26 (D) If the Borrower notifies the Lenders that such B Borrowing is cancelled pursuant to paragraph (C)(x) above, such B Borrowing shall not be made. (E) If the Borrower accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (C)(y) above, the Borrower shall in turn promptly notify by telephone, confirmed immediately in writing, (I) each Lender that has made an offer as described in paragraph (B) above, of the date and aggregate amount of such B Borrowing and whether or not any offer or offers made by such Lender pursuant to paragraph (B) above have been accepted by the Borrower, (II) each Lender that is to make a B Advance as part of such B Borrowing, of the amount of each B Advance to be made by such Lender as part of such B Borrowing, and (III) each Lender of the aggregate amount of the B Borrowing, the aggregate amount of the consequent B Reductions, the dates upon which such B Reductions commenced and will terminate, the lowest rate or margin (as applicable) bid and the rate or margin (as applicable) above which bids were not accepted by the Borrower in connection with such B Borrowing. Upon the fulfillment of the applicable conditions set forth in Article III, each Lender that is to make a B Advance as part of such B Borrowing shall, before 2:00 P.M. (New York City time) on the date of such B Borrowing make available to the Borrower, at the account of such Borrower with such Lender in New York, New York or, if no account exists, by wire transfer to such account as shall be specified by the Borrower by notice to such Lender, in same day funds. (F) The Borrower shall indemnify each Lender against any loss, cost, or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified for such B Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired or maintained by such Lender to fund the B Advance to be made by such Lender as part of such B Borrowing when such B Advance, as a result of such failure, is not made on such date. Each Lender claiming indemnity for such loss, cost or expense under this subclause (F) shall provide, at the time of making such claim, the Borrower with reasonable details, including the basis for the calculation thereof, of such loss, cost or expense, provided that, in the absence of manifest error, the amount of such claim so 27 notified shall be conclusive and binding upon the Borrower. (G) In the case of a proposed B Borrowing comprised of Eurodollar Rate related B Advances, the Borrower shall, as soon as possible, notify each Lender of the applicable Eurodollar Rate and, if the Majority Lenders disagree with the calculation of the Eurodollar Rate so notified by the Borrower, the Majority Lenders shall promptly notify each other Lender and the Borrower of such applicable Eurodollar Rate. (ii) Each B Borrowing shall be in an aggregate amount not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof and, following the making of such B Borrowing, shall not result in the limitations set forth in the proviso to the first sentence of subsection (i) above being exceeded. (iii) Within the limits and on the conditions set forth in this Section 2.02(b), the Borrower may from time to time borrow under this Section 2.02(b), repay or prepay pursuant to subsection (iv) below, and reborrow prior to the Termination Date under this Section 2.02(b). (iv) The Borrower shall repay each Lender which has made a B Advance on the maturity date of each B Advance (such maturity date being that specified by the Borrower for repayment of such B Advance in the related Notice of B Borrowing delivered pursuant to subsection (i)(A) above and provided in the B Note evidencing such B Advance), the then unpaid principal amount of such B Advance. The Borrower shall have no right to prepay any principal amount of any B Advance unless, and then only on the terms, specified by the Borrower for such B Advance in the related Notice of B Borrowing delivered pursuant to subsection (i)(A) above and provided in the B Note evidencing such B Advance. (v) The Borrower shall pay interest on the unpaid principal amount of each B Advance from the date of such B Advance to the date the principal amount of such B Advance is repaid in full, at the rate of interest for such B Advance specified by the Lender making such B Advance in its notice with respect thereto delivered pursuant to subsection (i)(B) above, payable on the interest payment date or dates specified by the Borrower for such B Advance in the related Notice of B Borrowing delivered pursuant to subsection (i)(A) above, as provided in the B Note evidencing such B Advance. (vi) The Indebtedness of the Borrower resulting from each B Advance made to the Borrower as part of a B 28 Borrowing shall be evidenced by a separate B Note of the Borrower payable to the order of the Lender making such B Advance. SECTION 2.03. Facility Fee. The Borrower agrees to pay a facility ------------ fee on the average daily aggregate amount of the Lenders' Commitments from the date hereof in the case of each Bank and from the effective date specified in the Assignment and Acceptance or Assumption Agreement pursuant to which it became a Lender in the case of each other Lender until the Termination Date at the Facility Fee Rate, payable quarterly in arrears and on the Termination Date. SECTION 2.04. Reduction and Extension of the Commitments/Substitution ------------------------------------------------------- of Banks. (a) The Borrower shall have the right, upon at least two Business - -------- Days' notice to the Lenders, to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Lenders, provided that each partial reduction shall be in the aggregate amount of $15,000,000 or an integral multiple of $1,000,000 in excess thereof. (b) Not later than the date 45 days prior to the Termination Date then in effect, the Borrower may deliver to the Lenders a notice requesting that the Commitments be extended to the fourth anniversary of such Termination Date. Within 10 days after its receipt of any such notice, each Lender shall notify the Borrower of its willingness or unwillingness so to extend its Commitment. Any Lender which shall fail so to notify the Borrower within such period shall be deemed to have declined to extend its Commitment. In the event each Lender shall be willing to extend its Commitment, the Borrower shall so notify each Lender and the Termination Date shall without further action be extended to the fourth anniversary of the date which shall theretofore have been the Termination Date. In the event that any Lender shall be unwilling to extend its Commitment, the Commitments of the Lenders will not be extended and the Termination Date shall remain unchanged. (c) Optional Termination and Substitution of Banks. The Borrower may, ---------------------------------------------- upon not less than two Business Days prior notice to a Bank or Banks, terminate in whole the Commitment of such Bank or Banks and arrange in respect of each terminated Bank for one or more bank or banks ("Assuming Bank or Banks") other than the Banks to assume a Commitment equal to or Commitments in aggregate amount equal to the amount of the Commitment of the terminated Bank, provided -------- that no such termination shall be made unless, at 29 such time, no event has occurred and is continuing which constitutes an Event of Default. Such termination shall be effective (x) with respect to each such terminated Bank's unused Commitment, on the date set forth in such notice, provided, however, that such date shall be no earlier than two Business Days - -------- ------- after receipt of such notice or (y) in the event that an Advance is outstanding from such terminated Bank which is to be paid in connection with such termination, on the last day of the then current interest period relating to such Advance. Such assumption shall be effective on the date specified in (x) or (y) above, as the case may be, provided, however, that each Assuming Bank shall -------- ------- have delivered to the other Banks, on or prior to such date, an Assumption Agreement in substantially the form of Exhibit E hereto. (The term "Bank" as used in this Agreement immediately following such assumption shall include an Assuming Bank.) Notwithstanding the provisions of this Section 2.04(c), termination or substitution shall not be effective unless the Assuming Bank meets, at the time of substitution, the criteria set forth in this Agreement for an "Eligible Assignee." Upon the termination of a Bank's Commitment under this subsection 2.04(c), the Borrower will pay or cause to be paid all principal of, and interest accrued to the date of such payment on, Advances owing to such Bank and pay any fees payable to such Bank pursuant to the provisions of Section 2.03 with respect to the Commitment which is terminated, any amounts payable pursuant to the provisions of Section 8.04 and any other amounts payable to such Bank hereunder with respect to the Commitment which is terminated or Advances which are paid; and upon such payments, the obligations of such Bank hereunder shall, by the provisions hereof, be released and discharged, and it shall be deemed to have relinquished its rights under this Agreement (other than any rights under Section 8.08). SECTION 2.05. Repayment. The Borrower shall repay the principal --------- amount of each A Advance owing to each Lender on the Termination Date. SECTION 2.06. Interest. The Borrower shall pay interest on the -------- unpaid principal amount of each A Advance owing to each Lender from the date of such A Advance until such principal amount shall be paid in full, at the following rates per annum: (a) Base Rate Advances. If such A Advance is a Base Rate Advance, a ------------------ rate per annum equal at all times to the Base Rate in effect from time to time, payable in arrears on (i) the last day of each quarter, (ii) 30 the last day of the Interest Period applicable to such Base Rate Advance, and (iii) the date such Base Rate Advance shall be paid in full; provided -------- that any amount of principal which is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times to 1-1/2% per annum above the Base Rate. (b) Adjusted CD Rate Advances. If such A Advance is an Adjusted CD ------------------------- Rate Advance, a rate per annum at all times during the Interest Period for such A Advance equal to the sum of the Adjusted CD Rate for such Interest Period, plus the Applicable Margin, payable in arrears on (A) if the Interest Period in respect of such Advance is less than or equal to 90 days, the last day of such Interest Period, or (B) if the Interest Period in respect of such Advance is greater than 90 days, the last day of each three-month period (beginning the first day of such Interest Period) occurring during that Interest Period, and also on the last day of such Interest Period; provided that any amount of principal which is not paid -------- when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times to 1 and 1/2 of 1% per annum above the Base Rate in effect from time to time. (c) Eurodollar Rate Advances. If such A Advance is a Eurodollar Rate ------------------------ Advance, a rate per annum equal at all times during the Interest Period for such A Advance to the sum of the Eurodollar Rate for such Interest Period, plus the Applicable Margin, payable in arrears on (A) if the Interest Period in respect of such Advance is less than or equal to three months, the last day of such Interest Period, or (B) if the Interest Period in respect of such Advance is greater than three months, the last day of each three-month period (beginning the first day of such Interest Period) occurring during that Interest Period, and also on the last day of such Interest Period; provided that any amount of principal which is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times to 1 and 1/2% per annum above the Base Rate in effect from time to time. 31 SECTION 2.07. Additional Interest on Eurodollar Rate Advances. The ----------------------------------------------- Borrower shall pay to each Lender additional interest on the unpaid principal amount of each Eurodollar Rate Advance of such Lender, from the date of such A Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurodollar Rate for the Interest Period for such A Advance from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such A Advance. Such additional interest shall be determined by such Lender and notified to the Borrower. Each Lender notifying the Borrower of such additional interest shall provide the Borrower, at the time of such notification, with reasonable details, including the basis for the calculation thereof, of such additional interest, provided that, in the absence of manifest error, the amount of such additional - -------- interest so notified shall be conclusive and binding upon the Borrower. SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank --------------------------- agrees to furnish to the Borrower and the Lenders timely information for the purpose of determining each Adjusted CD Rate or Eurodollar Rate, as applicable. Subject to Section 2.02(a)(ii)(B), if any of the Reference Banks shall not furnish such timely information to the Lenders for the purpose of determining any such interest rate, the Lenders shall determine such interest rate on the basis of timely information furnished by the remaining Reference Bank. (b) The Majority Lenders shall give prompt notice to the Borrower and the other Lenders of the applicable interest rate determined by the Majority Lenders for purposes of Section 2.06(a), (b) or (c), and the applicable rate, if any, furnished by each Reference Bank for the purpose of determining the applicable interest rate or, in the case of Section 2.02(b), applicable Eurodollar Rate under Sections 2.02(b) or 2.06(b) or (c). SECTION 2.09. Prepayments. (a) The Borrower shall have no right to ----------- prepay any principal amount of any A Advances other than as provided in subsection (b) below. (b) The Borrower may, (i) upon at least one Business Day's notice in the case of Base Rate Advances, (ii) one Business Day's notice in the case of Adjusted CD 32 Rate Advances or (iii) three Business Days' notice in the case of Eurodollar Rate Advances, to the Lenders stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall prepay the outstanding principal amounts of the A Advances comprising part of the same A Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that -------- -------- (i) each partial prepayment shall be in an aggregate principal amount not less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof and (ii) in the event of any such prepayment of an Adjusted CD Rate Advance or Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the Banks in respect thereof pursuant to Section 8.04(b). SECTION 2.10. Increased Costs. (a) If, due to either (i) the --------------- introduction of or any change (other than any change by way of imposition or increase of reserve requirements, in the case of Adjusted CD Rate Advances, included in the Adjusted CD Rate Reserve Percentage or, in the case of Eurodollar Rate Advances, included in the Eurodollar Rate Reserve Percentage) in or in the interpretation of any law or regulation by any court, authority or agency, or any other governmental, judicial or regulatory body, or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Adjusted CD Rate Advances or Eurodollar Rate Advances, then the Borrower shall from time to time, upon demand by such Lender, pay to such Lender additional amounts sufficient to compensate such Lender for such increased cost. Each Lender demanding payment of such amount shall provide, at the time of making such demand, the Borrower with reasonable details, including the basis for the calculation thereof, of such increase, provided that, in the absence of -------- manifest error, the amount so notified shall be conclusive and binding upon the Borrower. (b) If any Lender determines (in good faith) that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, upon demand by such Lender, the Borrower shall immediately pay to such Lender, from time to time as 33 specified by such Lender, additional amounts sufficient to compensate such Lender in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder. Each Lender demanding payment of such amount shall provide, at the time of making such demand, the Borrower with reasonable details, including the basis for the calculation thereof, of such increase, provided that, in the absence of manifest error, the amount so notified shall be conclusive and binding upon the Borrower. (c) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Borrower shall not be required to -------- compensate a Lender pursuant to this Section for any increased costs incurred more than 270 days prior to the date that such Lender notifies the Borrower of any event described in paragraph (a) or (b) of this Section (a "Change in Law") which gives rise to such increased costs and of such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise ---------------- to such increased costs is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof. (d) Notwithstanding the foregoing provisions of this Section, a Lender shall not be entitled to compensation pursuant to this Section in respect of any B Advances if the Change in Law which would otherwise entitle it to such compensation shall have been publicly announced prior to submission of the Notice of B Borrowing pursuant to which such Advance was made. (e) If any Lender requests compensation under this Section, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Advances hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to this Section and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (f) If any Lender requests compensation under this Section, then the Borrower may, at its sole expense and effort, upon notice to such Lender require such Lender to 34 assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 7.02), all its interests, rights and obligations under this Agreement (other than any outstanding B Advances held by it) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) at the -------- time the Borrower requires such an assignment, no event has occurred and is continuing which constitutes an Event of Default, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Advances (other than B Advances), accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under this Section, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. SECTION 2.11. Payments and Computations. (a) The Borrower shall ------------------------- make each payment hereunder and under the Notes not later than 2:00 P.M. (New York City time) (or 11:00 A.M. (New York City time) if the Borrower does not maintain an account with such Lender) on the day when due in U.S. dollars to the applicable Lender at its Applicable Lending Office in same day funds. From and after the effective date specified in each Assignment and Acceptance, the Borrower shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) [Intentionally left blank.] (c) All computations of interest with respect to the A Advances based on the Base Rate and of fees shall be made by the Majority Lenders on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest (i) with respect to the B Advances, (ii) with respect to the A Advances based on the Adjusted CD Rate, the Eurodollar Rate or the Federal Funds Rate and (iii) pursuant to Section 2.07 shall be made by the Majority Lenders on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the 35 last day) occurring in the period for which such interest is payable. Each determination by the Majority Lenders (or, in the case of Section 2.07, by a Lender) of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest and fees, as the case may be; provided, however, if such extension would cause payment of interest on or - -------- ------- principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment, shall be made on the next preceding Business Day. SECTION 2.12. A Notes. The Indebtedness of the Borrower resulting ------- from each A Advance made to the Borrower as part of an A Borrowing shall be evidenced by an A Note of the Borrower payable to the order of the Lender making such A Advance. SECTION 2.13. Sharing of Payments, Etc. If any Lender shall obtain ------------------------ any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the A Advances owing to it (other than pursuant to Section 2.04(c), 2.07, 2.10 or 2.14) in excess of its ratable share of payments on account of the A Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the A Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, provided, however, -------- ------- that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.13 may, to the fullest extent permitted by law, exercise all its rights of payment with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. 36 SECTION 2.14. Taxes. (a) Any and all payments by the Borrower ----- hereunder or under the Notes shall be made, in accordance with Section 2.11, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender, taxes imposed on its --------- income, and franchise taxes imposed on it, and any liability arising therefrom or with respect thereto, by the United States or any State or other political subdivision thereof or by the jurisdiction under the laws of which such Lender is organized or any political subdivision thereof and, in the case of each Lender, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.14) such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) The Borrower will indemnify each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.14) paid by such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender makes written demand therefor. If a Lender receives an indemnification payment from the Borrower in accordance with this subsection (c) and such Lender subsequently receives from the applicable jurisdiction a payment of all or a 37 portion of the amount of Taxes or Other Taxes or liability with respect to which such indemnity payment was made, such Lender shall promptly turn over (without interest) to the Borrower the amount of such repayment. (d) Within 30 days after the date of any payment of Taxes, the Borrower will furnish to the applicable Lender, at its Domestic Lending Office, the original or a certified copy of a receipt evidencing payment thereof. If no Taxes are payable in respect of any payment hereunder or under the Notes, the Borrower will, if reasonably requested by a Lender furnish to such Lender, at such address, a certificate from each appropriate taxing authority, or an opinion of counsel acceptable to the Majority Banks, in either case stating that such payment is exempt from or not subject to Taxes. (e) Any Lender claiming any additional amounts payable pursuant to this Section 2.14 shall use its best efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. (f) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.14 shall survive the payment in full of principal and interest hereunder and under the Notes. SECTION 2.15. Interest Elections. (a) Each A Borrowing initially ------------------- shall be of the Type specified in the applicable Notice of A Borrowing and, in the case of a Eurodollar Rate A Borrowing or Adjusted CD Rate A Borrowing, shall have an initial Interest Period as specified in such Notice of A Borrowing. Thereafter, the Borrower may elect to convert such A Borrowing to a different Type or to continue such A Borrowing and, in the case of a Eurodollar Rate A Borrowing or Adjusted CD Rate A Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected A Borrowing, in which case each such A Borrowing shall be allocated ratably among the Lenders having made the A Advances comprising such A Borrowing, and the A Advances comprising each such portion shall be considered a separate A Borrowing. This Section shall not apply to B Borrowings, which may not be converted or continued. 38 (b) To make an election pursuant to this Section, the Borrower shall notify each Lender of such election by telephone by the time that a Notice of A Borrowing would be required under Section 2.02 if the Borrower were requesting an A Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to each Lender of a written Interest Election Request signed by the Borrower. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the A Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting A Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting A Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) the Type of A Advances comprising such A Borrowing; and (iv) the Interest Period for each such A Advance. If any such Interest Election Request requests a Eurodollar Rate A Borrowing but does not specify an Interest Period, the Borrower shall be deemed to have selected an Interest Period of one month's duration. If any such Interest Election Request requests an Adjusted CD Rate A Borrowing but does not specify an Interest Period, the Borrower shall be deemed to have selected an Interest Period of 30 days duration. (d) If the Borrower fails to deliver a timely Interest Election Request with respect to an A Borrowing prior to the end of the Interest Period applicable thereto, then, unless such A Borrowing is repaid as provided herein, at the end of such Interest Period such A Borrowing shall be continued as or converted to a Base Rate A Borrowing with an Interest Period ending on the next day that is the last day of a quarter. 39 ARTICLE III CONDITIONS OF LENDING SECTION 3.01. Condition Precedent to Restatement. The effectiveness ---------------------------------- of the amendment and restatement of the Existing Credit Agreement in the form of this Agreement is subject to the execution and delivery of counterparts of this Agreement by the Borrower and the Lenders and the satisfaction of the following additional conditions precedent: (i) The Lenders shall have received the following, each dated the date hereof, in form and substance satisfactory to them: (a) An A Note to the order of any Lender requesting such note to replace the A Note issued to such Lender under the Existing Credit Agreement. (b) An Officer's Certificate attaching copies of the resolutions of the Board of Directors of the Borrower (or an authorized committee thereof) approving this Agreement and the Notes, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the Notes. (c) An Officer's Certificate certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement and the Notes and the other documents to be delivered hereunder. (d) A favorable opinion of a Senior Counsel of the Borrower, substantially in the form of Exhibit D hereto and as to such other matters as any Lender may reasonably request. (ii) The Borrower shall have paid to the Lenders the amendment fee separately agreed upon. Upon satisfaction of the foregoing conditions the Existing Credit Agreement shall be deemed amended and restated in the form of this Agreement, and the commitments under the Existing Credit Agreement shall be deemed terminated to the extent inconsistent with the Commitments set forth herein, and the Borrower shall pay any accrued fees and other 40 amounts owing to any Bank party to the Existing Credit Agreement but not this Agreement. SECTION 3.02. [Intentionally left blank] SECTION 3.03. Conditions Precedent to Each Borrowing Increasing the ----------------------------------------------------- Aggregate Amount of Advances. The obligation of each Lender to make an A - ---------------------------- Advance on the occasion of each A Borrowing (including the initial A Borrowing) which would increase the aggregate outstanding amount of A Advances owing to such Lender over the aggregate outstanding amount of A Advances owing to such Lender immediately prior to the making of such A Advance, shall be subject to the further conditions precedent that on the date of such A Borrowing the following statements shall be true (and each of the giving of the applicable Notice of A Borrowing and the acceptance by the Borrower of the proceeds of such A Borrowing shall constitute a representation and warranty by the Borrower that on the date of such A Borrowing such statements are true): (i) The representations and warranties contained in Section 4.01 are correct on and as of the date of such A Borrowing, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, and (ii) No event has occurred and is continuing, or would result from such A Borrowing or from the application of the proceeds therefrom, which constitutes an Event of Default or which would constitute an Event of Default but for the requirement that notice be given or time elapse or both. SECTION 3.04. Conditions Precedent to Each B Borrowing. The ---------------------------------------- obligation of each Lender which is to make a B Advance on the occasion of a B Borrowing (including the initial B Borrowing) to make such B Advance as part of such B Borrowing is subject to the conditions precedent that (a) such Lender shall have received the written confirmatory Notice of B Borrowing with respect thereto and (b) on the date of such B Borrowing the following statements shall be true (and each of the giving of the applicable Notice of B Borrowing and the acceptance by the Borrower of the proceeds of such B Borrowing shall constitute a representation and warranty by the Borrower that on the date of such B Borrowing such statements are true): 41 (a) The representations and warranties contained in Section 4.01 are correct on and as of the date of such B Borrowing, before and after giving effect to such B Borrowing and to the application of the proceeds therefrom, as though made on and as of such date. (b) No event has occurred and is continuing, or would result from such B Borrowing or from the application of the proceeds therefrom, which constitutes an Event of Default or which would constitute an Event of Default but for the requirement that notice be given or time elapse or both. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower. The ---------------------------------------------- Borrower represents and warrants as follows: (a) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction indicated at the beginning of this Agreement, has all requisite corporate power and authority to conduct its business, to own its properties and assets as it is now conducted and as proposed to be conducted and is qualified or licensed to do business as a foreign corporation in good standing in all jurisdictions in which the conduct of its business requires it to so qualify or be licensed except where the failure to do so, individually or in the aggregate, could not reasonably be expected to materially and adversely affect the ability of the Borrower to perform its obligations under this Agreement or any Note. (b) The execution, delivery and performance by the Borrower of this Agreement and the Notes, including the Borrower's use of the proceeds thereof, are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's charter or by-laws or (ii) law (including, without limitation, Regulations T, U and X issued by the Board of Governors of the Federal Reserve Board) or any contractual restriction binding on or affecting the Borrower. 42 (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Agreement or the Notes. (d) This Agreement is, and each of the Notes when delivered hereunder will be, the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with their respective terms. (e) [Intentionally Left Blank.] (f) There are no actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened, against the Borrower or any Subsidiary the reasonably anticipated outcome of which would materially and adversely affect the ability of the Borrower to perform its obligations under this Agreement or any Note or which purports to affect the legality, validity or enforceability of this Agreement or any Note. (g) [Intentionally left blank] (h) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock, except in compliance with Regulations T, U and X issued by the Board of Governors of the Federal Reserve Board. (i) Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940. (j) The Borrower and each Subsidiary have filed all tax returns (Federal, state and local) required to be filed and paid all taxes shown thereon to be due, including interest and penalties, or provided adequate reserves for payment thereof. (k) In the ordinary course of its business, the Borrower conducts an ongoing review of the effect of Environmental Laws on the operations and properties of the Borrower, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of 43 properties presently or previously owned, any liabilities in connection with off-site deposit of Hazardous Substances or wastes, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, the Borrower has reasonably concluded that, except with respect to any matter disclosed in Items 1 or 3 in the Borrower's 1997 Form 10-K or in the Commitments and Contingencies Note to the consolidated financial statements incorporated therein, such associated liabilities and costs, including the costs of compliance with Environmental Laws, are unlikely to cause a material adverse change in the financial condition or results of operations of the Borrower from that shown on the consolidated financial statements as at, and for the nine-month period ended September 30, 1998, provided that the inclusion of such exception does not indicate that any -------- such matter will cause such a material adverse change. (l) Except as otherwise disclosed in the Annual Report of the Borrower on Form 10-K for the fiscal year ended December 31, 1998 (the "Borrower's 10K"), as supplemented (but only if each such supplement is delivered to the Lenders) on or before the date the amendment and restatement of the Existing Credit Agreement becomes effective pursuant to Section 3.01, to the best of the Borrower's knowledge, the disclosures relating to Year 2000 materials contained in the Borrower's 10K referred to above in this clause (1) materially accurately reflect as of the date such statements are purported to be made, the Borrower's efforts to address issues associated with the Year 2000. 44 ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants. So long as any Advance shall --------------------- remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will, unless the Majority Lenders shall otherwise consent in writing: (a) Compliance with Laws, Etc. Comply, and cause each Subsidiary to -------------------------- comply, with all applicable laws, rules, regulations and orders (such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith) the failure to comply with which would have a material adverse effect on the property, condition or operations (financial or otherwise) of the Borrower or the Borrower and the Subsidiaries taken as a whole. (b) Consolidated Leverage Ratio. Maintain a Consolidated Leverage --------------------------- Ratio as of the last day of any Reference Period of not more than 3.5 to 1.0. (c) Consolidated Interest Coverage Ratio. Maintain a Consolidated ------------------------------------ Interest Coverage Ratio for any Reference Period of not less than 3.0 to 1.0. (d) [Intentionally Left Blank.] (e) Insurance. Maintain, and cause each Subsidiary to maintain, --------- insurance with reputable insurance companies or associations in such amount and covering such risks as the Borrower, in its good faith business judgment, believes necessary. (f) ERISA. And will ensure that each ERISA Affiliate will meet its ----- minimum funding requirements and all of its other obligations under ERISA with respect to all of its Plans and satisfy all of its obligations to Multiemployer Plans, including any Withdrawal Liability, if the failure to do so would have a material adverse effect on the property, condition or operations of the Borrower or the Borrower and the Subsidiaries taken as a whole. 45 (g) Reporting Requirements. Furnish to the Lenders: ---------------------- (i) as soon as available and in any event within 60 days after the end of each of the first three quarters of each year, balance sheets of the Borrower and the Subsidiaries, on a consolidated basis, as of the end of such quarter and statements of income and retained earnings and cash flow of the Borrower and the Subsidiaries, on a consolidated basis, for the period commencing at the end of the previous year and ending with the end of such quarter, certified by the chief financial officer of the Borrower, subject to audit and year end adjustments; (ii) as soon as available and in any event within 120 days after the end of each year, a copy of the balance sheets of the Borrower and the Subsidiaries, on a consolidated basis, as of the end of such year and the statements of income and retained earnings and cash flow of the Borrower and the Subsidiaries, on a consolidated basis, for such year, certified by KPMG Peat Marwick or another independent nationally recognized firm of public accountants; (iii) as soon as possible and in any event within ten days after an officer of the Borrower becomes aware of the occurrence of each Event of Default (and each event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default), an Officer's Certificate setting forth details of such Event of Default or event and the action which the Borrower has taken and proposes to take with respect thereto; (iv) contemporaneously with each delivery of the statements referred to in clauses (i) and (ii) above, (A) either an Officer's Certificate stating that no Event of Default (other than by reason of non-compliance with the covenants referred to in Sections 5.01(b), (c) and (d)) and no event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default (other than by reason of non-compliance with the covenants referred to in Sections 5.01(b), (c) and (d)) occurred during such quarter or, if applicable, an Officer's Certificate pursuant to clause (iii) above, (B) an Officer's Certificate stating that, as of the last day of the preceding quarter, and to the best of his or her knowledge, 46 at all times during the preceding quarter, the Borrower was in compliance with the covenants referred to in Sections 5.01(b), (c) and (d) and providing reasonable details of the calculations evidencing the Borrower's compliance with such covenants and (C) reasonable details of each material change in GAAP from those applied in preparing the statements referred to in Section 4.01(e) insofar as such changes are applicable to the statements referred to in clauses (i) and (ii) above; (v) promptly after the sending or filing thereof, copies of all reports which the Borrower sends to any of its shareholders, and copies of all reports and registration statements which the Borrower or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange (other than those pertaining to employee benefit plans); and (vi) such other information respecting the condition or operations, financial or otherwise, of the Borrower or any Subsidiary as any Lender may from time to time reasonably request. SECTION 5.02. Negative Covenants. So long as any Advance shall ------------------ remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not, without the written consent of the Majority Lenders: (a) Liens. Create, assume or suffer to exist or permit any Subsidiary ----- of the Borrower to create, assume or suffer to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired, except (i) Permitted Encumbrances, (ii) other Liens incidental to the conduct of its business or the ownership of its property and assets which were not incurred to secure Indebtedness, and which do not in the aggregate materially detract from the value of its property or assets or materially impair the use thereof in the operation of its business, (iii) Liens on property or assets of a Domestic Subsidiary to secure obligations of such Subsidiary to the Borrower or another Domestic Subsidiary, 47 (iv) any Lien on property of any Foreign Subsidiary to secure Indebtedness of such Subsidiary, provided that, immediately after giving effect thereto and to the concurrent repayment of any other Indebtedness, the aggregate principal amount of outstanding Indebtedness secured by Liens permitted by this clause (iv) or by clause (vi), (vii), (viii) or (ix) of this Section does not exceed 10% of Consolidated Net Tangible Assets, (v) Liens incurred in connection with any Tax-Exempt Financing which do not in the aggregate materially detract from the value of the property or assets affected thereby or materially impair the use of such property or assets in the operation of its business, (vi) Liens on property or assets granted in connection with applications for or reimbursement obligations with respect to letters of credit issued at the request of the Borrower or a Subsidiary by a banking institution to secure the performance of obligations of the Borrower or a Subsidiary relating to such letters of credit, to the extent such banking institution requested the granting to it of such Lien as a condition for its issuance of the letter of credit; provided that, immediately after giving effect thereto and to the concurrent repayment of any other Indebtedness, the aggregate principal amount of outstanding Indebtedness secured by Liens permitted by this clause (vi) or by clause (iv), (vii), (viii) or (ix) of this Section does not exceed 10% of Consolidated Net Tangible Assets, (vii) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (A) such Lien is not created in contemplation of or in -------- connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (B) such Lien shall not apply to any other property or assets of the Borrower or any Subsidiary, (C) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case maybe, and extensions, 48 renewals and replacements thereof that do not increase the outstanding principal amount thereof and (D) immediately after giving effect thereto and to the concurrent repayment of any other Indebtedness, the aggregate principal amount of outstanding Indebtedness secured by Liens permitted by this clause (vii) or by clause (iv), (vi), (viii) or (ix) of this Section does not exceed 10% of Consolidated Net Tangible Assets, (viii) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Subsidiary; provided that (A) with -------- respect to Liens securing Indebtedness of any Domestic Subsidiary, such Liens secure Indebtedness permitted by clause (ii) of Section 5.02(b), (B) such Liens and the Indebtedness secured thereby are incurred prior to or within 90 days after acquisition or the completion of such construction or improvement, (C) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets, (D) such Liens shall not apply to any other property or assets of the Borrower or any Subsidiary and (E) immediately after giving effect thereto and to the concurrent repayment of any other Indebtedness, the aggregate principal amount of outstanding Indebtedness secured by Liens permitted by this clause (viii) or by clause (iv), (vi), (vii) or (ix) of this Section does not exceed 10% of Consolidated Net Tangible Assets, (ix) Liens securing other obligations of the Borrower and its Subsidiaries not expressly permitted by clauses (i) through (viii) above; provided that, immediately after giving effect thereto and to the concurrent repayment of any other secured obligations, the aggregate principal amount of outstanding obligations secured by Liens permitted by this clause (ix) or by clause (iv), (vi), (vii) or (viii) of this Section does not exceed 10% of Consolidated Net Tangible Assets, and (x) Liens on Margin Stock, if and to the extent the value of all Margin Stock of the Borrower and its Subsidiaries exceeds 25% of the value of the total assets subject to this Section 5.02(a) (it being understood that Margin Stock not in excess of 25% of the value of such assets will be subject to the restrictions of this Section 5.02(a)). 49 (b) Domestic Subsidiary Indebtedness. Permit any Domestic Subsidiary -------------------------------- to create, incur, assume or permit to exist any Indebtedness, except: (i) Indebtedness of any Domestic Subsidiary to the Borrower or any other Domestic Subsidiary; (ii) Indebtedness incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (A) such -------- Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement and (B) the aggregate principal amount of outstanding Indebtedness permitted by this clause (ii) and clause (iii) below shall not, at the time that any such Indebtedness is incurred (and after giving effect to any concurrent repayment of Indebtedness), exceed 10% of Consolidated Net Tangible Assets; (iii) Indebtedness of any Person that becomes a Domestic Subsidiary after the date hereof; provided that (A) such Indebtedness -------- exists at the time such Person becomes a Domestic Subsidiary and is not created in contemplation of or in connection with such Person becoming a Domestic Subsidiary and (B) the aggregate principal amount of outstanding Indebtedness permitted by this clause (iii) and clause (ii) above shall not, at the time that any such Indebtedness is incurred (and after giving effect to any concurrent repayment of Indebtedness), exceed 10% of Consolidated Net Tangible Assets; and (iv) other Indebtedness in an aggregate principal amount not exceeding $10,000,000 at any time outstanding. (c) Mergers, Etc. (i) Merge or consolidate with or into any other ------------- Person (other than a Subsidiary) or (ii) convey, transfer, lease or otherwise dispose of, or permit a Subsidiary to convey, transfer, lease, or otherwise dispose of, (whether in one transaction or in 50 a series of related transactions) all or substantially all of the property or assets of the Borrower and its Subsidiaries taken as a whole (whether now owned or hereafter acquired), directly or indirectly, to any Person, including through a merger or consolidation of a Subsidiary with an unaffiliated party, unless, in each case of (i) or (ii), (A) after giving effect to such proposed transaction, no Event of Default or event which with the giving of notice or lapse of time, or both, would constitute an Event of Default would exist, (B) the surviving or acquiring entity is a corporation organized under the laws of one of the United States and (C) the surviving or acquiring corporation if other than the Borrower, expressly assumes the performance of all the obligations of the Borrower under this Agreement and the Notes provided that to the extent that the -------- value of all Margin Stock owned by the Borrower and its Subsidiaries taken as a whole exceeds 25% of the value of the total assets of the Borrower and its Subsidiaries subject to this Section 5.02(c), nothing in this Section 5.02(c) shall prohibit the sale of such Margin Stock (it being understood that Margin Stock not in excess of 25% of the value of such assets will be subject to the restrictions of this Section 5.02(c)). (d) [Intentionally Left Blank.] (e) ERISA. Create, assume or suffer to exist or permit any ERISA ----- Affiliate to create, assume or suffer to exist (i) any Insufficiency of any Plan (or, in the case of a Plan with respect to which an ERISA Event described in clauses (iii) through (vi) of the definition of ERISA Event shall have occurred and then exist, the liability related thereto), in respect of which Plan an ERISA Event has occurred, or (ii) any Withdrawal Liability under any Multiemployer Plan, if the sum of (A) any such Insufficiency or Withdrawal Liability, as applicable, (B) the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or, in the case of a Plan with respect to which an ERISA Event described in clauses (iii) through (vi) of the definition of ERISA Event shall have occurred and then exist, the liability related thereto), (C) amounts then required to be paid to any and all other Multiemployer Plans by the Borrower or its ERISA Affiliates as Withdrawal Liability and (D) the aggregate principal amount of all Indebtedness of the Borrower and all the Subsidiaries secured by Liens permitted by clauses (iv), (vi), (vii), (viii) and (ix) of Section 5.02(a), shall exceed 10% of Consolidated Net Tangible Assets. 51 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default. If any of the following events ----------------- ("Events of Default") shall occur and be continuing: (a) The Borrower shall fail to pay (i) any principal of any Advance when the same becomes due and payable or (ii) any interest on any Advance or any fees or other amounts payable under this Agreement within five days of the same becoming due and payable; or (b) Any representation or warranty made by the Borrower herein or by the Borrower (or any of its officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made; or (c) The Borrower shall fail to perform or observe (i) any term, covenant or agreement contained in Section 5.01 (b) or (c) or Section 5.02, or (ii) any term, covenant or agreement contained in this Agreement or any Note (other than as referred to in subsection (a) or clause (i) above) on its part to be performed or observed if, in the case of this clause (ii), such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by any Lender; or (d) The Borrower or any Subsidiary shall fail to pay any installment of principal of or any premium or interest on any Indebtedness, which is outstanding in a principal amount of at least $25,000,000 in the aggregate (but excluding Indebtedness outstanding hereunder) of the Borrower or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness, or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness, or any Indebtedness of the Borrower or any Subsidiary which is outstanding in an aggregate principal amount 52 of at least $10,000,000 shall, for any reason, be accelerated; or (e) Either the Borrower or any Significant Subsidiary or any two or more Subsidiaries which (when taken together) would have aggregate total assets constituting those of a Significant Subsidiary shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any such Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property, and, in the case of any such proceeding instituted against the Borrower or such Subsidiary (but not instituted by it), either such proceeding shall not be dismissed or stayed for 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against it or the appointment of a trustee, custodian or other similar official for it or any substantial part of its property) shall occur; or the Borrower or any such Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Any judgment or order for the payment of money in excess of $5,000,000 shall be rendered against the Borrower or any Subsidiary and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order and, within 60 days of the commencement of such proceedings, such judgment shall not have been satisfied or (subject to clause (ii) below) shall have been stayed or (ii) there shall be any period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; then, and in any such event, the Majority Lenders may (i) declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) by notice to the Borrower, declare the Notes, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the 53 Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an Event of Default resulting from the actual or deemed entry of an order for relief with respect to the Borrower or any Subsidiary under the Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. ARTICLE VII ASSIGNMENTS AND PARTICIPATIONS SECTION 7.01. Binding Effect. This Agreement shall become effective -------------- when it shall have been executed by the Borrower and by each Bank and thereafter shall be binding upon and inure to the benefit of the Borrower and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. SECTION 7.02. Assignments. (a) Each Lender may, upon at least 10 ----------- Business Days' notice to the Borrower, assign to one or more banks or other entities (other than an assignment which would result in increased costs to the Borrower pursuant to Sections 2.07, 2.10 or 2.14 hereof or under the definitions of "Adjusted CD Rate" or "Base Rate") all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it); provided, however, that (i) if such bank or other entity is not already -------- a Lender or an Affiliate of a Lender and prior to the expiring of the 10 Business Days' notice referred to above, the Borrower notifies the assignor Lender that such assignee is, in its sole discretion, not acceptable to it, such assignor Lender shall not make such assignment, (ii) the parties to each such assignment shall execute and deliver to the Borrower an Assignment and Acceptance, together with any Note or Notes subject to such assignment, (iii) each such assignment shall be only to an Eligible Assignee, (iv) each such assignment shall be of a constant, and not a varying, percentage of all of the assigning 54 Lender's rights and obligations under this Agreement and (v) the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000, in the case of an assignment to a Lender and $10,000,000, in the case of an Assignment to an Eligible Assignee not already a Lender and, in each case, shall be an integral multiple of $5,000,000. Upon such execution and delivery, from and after the effective date specified in each Assignment and Acceptance, (A) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (B) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01(e) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee agrees that it will perform in accordance with 55 their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender; and (vi) such assignee confirms that it is an Eligible Assignee. (c) Subject to its rights to notify the Assignor of the unacceptability of an assignee under and in accordance with Section 7.02(a), upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Eligible Assignee, the Borrower, at its own expense shall execute and deliver to the assignee Lender in exchange for the surrendered A Note or A Notes a new A Note to the order of such assignee Lender in an amount equal to the Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment hereunder, a new A Note to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new A Note or A Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered A Note or A Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A-1 hereto. (d) Each Lender may assign to one or more banks or other entities any B Note or B Notes held by it. (e) Any Lender may pledge all or a portion of its Advances to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Revenue Bank. No such assignment shall release the assigning Lender from its obligations under the Agreement. SECTION 7.03. Participations. Each Lender may sell participations to -------------- one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, and the Advances owing to it and the Note or Notes held by it); provided, however, that (a) such Lender's obligations under this -------- Agreement (including, without limitation, its Commitment to the Borrower hereunder) shall remain unchanged, (b) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (c) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (d) the Borrower and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and (e) such participation is not prohibited 56 by applicable law. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument -------- may provide that such Lender will not, without the consent of the Person acquiring such participation, agree to any amendment, modification or waiver described in the proviso to Section 8.01 that affects such Person. SECTION 7.04. Information. Any Lender may, in connection with any ----------- assignment or participation or proposed assignment or participation pursuant to this Article VII, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower. ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. No amendment or waiver of any ---------------- provision of this Agreement or the Notes, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, -------- ------- unless in writing and signed by all the Lenders, do any of the following: (a) increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (b) reduce the principal of, or interest on, the A Notes, A Advances, or any fees or other amounts payable hereunder, (c) postpone any date fixed for any payment of principal of, or interest on, the A Notes, A Advances, or any fees or other amounts payable hereunder, (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the A Notes, A Advances, or the number of Lenders, which shall be required for the Lenders or any of them to take any action hereunder or (e) amend this Section 8.01. SECTION 8.02. Notices, Etc. All notices and other communications ------------ provided for hereunder shall be in writing (including, telegraphic, telex, telecopy or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered, if to the Borrower, at its address at 501 Merritt 57 7, P.O. Box 4500, Norwalk, Connecticut, 06851-4500, telecopy no. (203) 750-3292, Attention: Treasury Department; if to any Bank, at its Domestic Lending Office specified opposite its name on Schedule I hereto; if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed, telegraphed, telexed, telecopied or cabled, be effective only when received by the relevant party (which in the case of telex shall be when receipt is confirmed by the appropriate telex answer back). SECTION 8.03. No Waiver; Remedies. No failure on the part of any ------------------- Lender to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. Costs, Expenses and Taxes. (a) The Borrower agrees to ------------------------- pay on demand all costs and expenses in connection with the preparation, execution, delivery, administration, modification and amendment of this Agreement, the Notes and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Lenders with respect thereto and with respect to advising the Lenders as to their rights and responsibilities under this Agreement, and all costs and expenses, if any (including, without limitation, reasonable fees and expenses of counsel for each Lender), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes and the other documents to be delivered hereunder. (b) If any payment of principal of any Adjusted CD Rate Advance or Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Advance, as a result of a payment pursuant to Section 2.09(b), acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, the Borrower shall, upon demand by such Lender, pay to such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment, including, without limitation, any 58 loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. SECTION 8.05. [Intentionally left blank.] SECTION 8.06. Lender's Credit Decision. Each Lender acknowledges ------------------------ that it has, independently and without reliance upon any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 8.07. Lender and Affiliates. Each Lender and its affiliates --------------------- may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with the Borrower, any Subsidiary and any person or entity who may do business with or own securities of the Borrower or any Subsidiary, all as it if were not a Lender and without any duty to account therefor to any other Lender. SECTION 8.08. Indemnification by Borrower. The Borrower agrees to --------------------------- indemnify and hold harmless each Lender (and each of their respective officers, agents, employees and directors) from and against any and all claims, damages, liabilities, obligations, losses, penalties, actions, judgments, suits, costs, expenses and disbursements (including, without limitation, reasonable fees and disbursements of counsel) of any kind or nature whatsoever ("Claims") which may be imposed on, incurred by or asserted against such Lender or any of its officers, agents, employees or directors (but excluding Claims of any Person resulting from such Person's gross negligence or willful misconduct) in connection with or arising out of any investigation, litigation or proceeding (including, without limitation, any threatened investigation, litigation or proceeding) related to any acquisition or proposed acquisition by the Borrower, or by any Subsidiary of the Borrower, of all or any portion of the stock or substantially all the assets of any Person whether or not the Person to be indemnified hereunder is a party thereto, provided that this indemnity shall not -------- cover (i) any Claims for actions unrelated to this Agreement taken by a Lender prior to the date of this Agreement except to the extent such Claims relate to any commitment letter or summary of terms prepared in connection with this Agreement or (ii) any 59 Claims that do not arise out of or by reason of (whether directly or indirectly) this Agreement or any transactions contemplated by this Agreement or the Borrower's use of the proceeds of the Advances. SECTION 8.09. Governing Law. This Agreement and the Notes shall be ------------- governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.10. Execution in Counterparts. This Agreement may be ------------------------- executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 8.11. Special Prepayment Right. (a) In the event that a ------------------------ Change of Control Date shall occur, the Borrower will, within 10 days after such Change of Control Date, give each Lender written notice thereof and describe in reasonable detail the facts and circumstances giving rise thereto, and the Borrower will prepay, if any such Lender shall so request, all of the Advances from such Lender plus interest accrued to the date of prepayment and any other fees and amounts as may then be payable by Borrower under this Agreement. Said request (the "Prepayment Notice") shall be made by a Lender in writing not later than 45 days after the Change of Control Date and shall specify (i) the date (the "Special Prepayment Date") upon which the Borrower shall prepay the Advances, which date shall be not less than 15 days nor more than 45 days from the date of the Prepayment Notice and (ii) the amount of the Advances to be prepaid. In the event of such request, the Commitment of such Lender to make Advances shall forthwith terminate. (b) On the Special Prepayment Date, the Borrower shall prepay all of the Advances of such Lender plus interest accrued thereon to the Special Prepayment Date and such other fees and amounts as may then be payable by Borrower under this Agreement. Payment shall be made as provided in this Agreement. (c) For the purposes of this Section 8.11: (i) the term "Change of Control Date" shall mean (A) the first day on which any person, or group of related persons, has beneficial ownership of more than 50% of the outstanding voting stock of the Borrower or (B) the date immediately 60 following the first date on which the members of the Board of Directors of the Borrower (the "Board") at the commencement of any period of 730 consecutive days (together with any other Directors whose appointment or election by the Board or whose nomination for election by the stockholders of the Borrower was approved by a vote of at least a majority of the Directors then in office who either were Directors at the beginning of such period or whose appointment or election or nomination for election was previously so approved) shall cease to constitute a majority of the Board at the end of such period; provided, however, that a Change of Control Date shall not be deemed to have occurred under clause (A) hereof if (x) the Borrower shall have merged or disposed of a portion of its assets in compliance with the requirements of subsection 5.02(c) hereof within 10 days after the acquisition of such beneficial ownership shall have occurred and (y) no person or group of related persons shall have beneficial ownership of more than 50% of the outstanding voting stock of the Borrower after such merger or disposition. (ii) the term "voting stock" shall mean stock of any class or classes (however designated) having ordinary voting power for the election of a majority of the directors of the Borrower other than stock having such power only by reason of a contingency. 61 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. Borrower -------- OLIN CORPORATION By: /s/ Janet Pierpont -------------------- Name: Janet Peirpont Title: Vice President and Treasurer Commitment Banks - ---------- ----- $40,000,000 WACHOVIA BANK, N.A. By: /s/ John C. Coffin ------------------ Name: John C. Coffin Title: Senior Vice President $35,000,000 THE CHASE MANHATTAN BANK By: /s/ Robert T. Sacks --------------------- Name: Robert T. Sacks Title: Managing Director $35,000,000 CITIBANK, N.A. By: /s/ Frank Gerbasi ----------------- Name: Frank Gerbasi Title: Vice President $30,000,000 BANK OF AMERICA By: /s/ Eileen Higgins ------------------ Name: Eileen Higgins Title: Vice President 62 $25,000,000 BANKERS TRUST COMPANY By: /s/ Robert R. Telesca ---------------------- Name: Robert R. Telesca Title: Authorized Signatory SCHEDULE I OLIN CORPORATION CREDIT AGREEMENT DATED AS OF SEPTEMBER 30, 1993 All Notices and A/B Advance Payments ------------------------------------
Name of Bank Domestic Lending Office CD Lending Office Eurodollar Lending Office - ------------ ----------------------- ----------------- ------------------------- Wachovia Bank For Operation Notices: Same as Domestic Same as Domestic --------------------- Wachovia Bank, N.A. 191 Peachtree Street, N.E. Atlanta, GA 30303 Attn: Peaches Brown Tel. No.: 404-332-6688 Fax: 404-332-4320 For Credit Matters: ------------------ John Coffin, SVP Wachovia Bank, N.A. 191 Peachtree Street, N.E. Atlanta, GA 30303 Tel: No.: 404-332-4056 Fax: 404-332-6898 For Payments: ------------ Wachovia Bank ABA: #061000010 Account 18171498 Attn: Complex Speciality Unit The Chase Manhattan Bank For Operation Notices: Same as Domestic Same as Domestic --------------------- 1 Chase Manhattan Plaza 8th Floor New York, NY 10081 Attn: Tonya Mitchell Tel No:. 212-552-7206 Fax: 212-552-5777
2 All Notices and A/B Advance Payments ------------------------------------
Name of Bank Domestic Lending Office CD Lending Office Eurodollar Lending Office - ------------ ----------------------- ----------------- ------------------------- For Credit Matters: ------------------ Robert Sacks Managing Director 270 Park Avenue 38th Floor New York, NY 10017 Tel No.: 212-270-6000 Fax: 212-270-1355 For Payment: ----------- The Chase Manhattan Bank ABA: #021000021 New York, New York For Credit to CMLN9420 Commercial Loan Operations Re: Olin Corporation Attn: John Knapp Citibank, N.A. For Operations Notices: Same as Domestic Same as Domestic ---------------------- Citibank, N.A. 2 Penns Way, Suite 200 New Castle, DE 19720 Attn: Mark Waldron Tel. No.: 302-894-6084 Fax: 302-894-6120 For Credit Matters: ------------------ Mellissa May CitiBank, N.A. 399 Park Avenue New York, NY 10043 Tel. No.: 212-559-7259 Fax: 212-826-2371
3 All Notices and A/B Advance Payments ------------------------------------
Name of Bank Domestic Lending Office CD Lending Office Eurodollar Lending Office - ------------ ----------------------- ----------------- ------------------------- For Payments: ------------ Citibank, N.A. ABA: #021000089 A/C: #4054-8046 Ref: Olin Corporation Attn: Mark Waldron Bank of America For Operation Notices: Same as Domestic Same as Domestic --------------------- Bank of America 1850 Gateway Blvd. Concord, CA 94520 Attn: J. Miller Tel. No.: 925-675-7209 Fax: 925-675-7531 For Credit Matters: ------------------ Eileen Higgins Vice President 335 Madison Avenue 5th Floor New York, NY 10017 Tel. No.: 212-503-7260 Fax: 212-503-7878 For Payments: ------------ Bank of America ABA #1210-0035-8 Acct. No.: 1233183980 Attn: J. Miller Favor of Olin Corporation
4 All Notices and A/B Advance Payments ------------------------------------
Name of Bank Domestic Lending Office CD Lending Office Eurodollar Lending Office - ------------ ----------------------- ----------------- ------------------------- Bankers Trust For Operation Notices: Same as Domestic Same as Domestic --------------------- 130 Liberty Street 14th Floor New York, NY 10006 Attn: Joe Regan Tel. No.: 212-250-4169 Fax: 212-250-2340 For Credit Matters: ------------------ Tom Cole Managing Director 233 S Wacker Drive Suite 8400 Chicago, IL 60606 Tel. No.: 312-993-8051 Fax: 312-993-8162 For Payments: ------------ Bankers Trust Company New York, New York ABA #021-001-033 Commercial Loan Division Acct. No.: 99-401-268 Attn: Joe Regan Ref: Olin Corp.
EXHIBIT A-1 A PROMISSORY NOTE * U.S. $___________ Date: _________, ____ FOR VALUE RECEIVED, the undersigned, OLIN CORPORATION, a Virginia corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of ___________ ________________________________________________________________________________ (the "Lender") for the account of its Applicable Lending Office (as defined in the Credit Agreement referred to below) the principal amount of each A Advance (as defined in the Credit Agreement) owing to the Lender by the Borrower pursuant to the Credit Agreement (as defined below) on the last day of the Interest Period (as defined in the Credit Agreement) for such A Advance. The Borrower promises to pay interest on the unpaid principal amount of each A Advance from the date of such A Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to the Lender, at its Applicable Lending Office (as defined in the Credit Agreement, referred to below), in same day funds. Each A Advance owing to the Lender by the Borrower and the maturity thereof, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note; provided that any failure to make such a recording or any error in such recording shall not in any manner affect the obligation of the Borrower to make payment of principal and interest in accordance with this Promissory Note and the Credit Agreement. This Promissory Note is one of the A Notes referred to in, and is entitled to the benefits of, the Credit Agreement dated as of September 30, 1993 as amended ___________________ * Insert the dollar amount of the Bank's Commitment. 2 and restated as of February 22, 1999 (as otherwise amended and in effect from time to time, the "Credit Agreement") among the Borrower and certain other lenders parties thereto. The Credit Agreement, among other things, (i) provides for the making of the A Advances by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such A Advance being evidenced by this Promissory Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. This Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York, United States of America. OLIN CORPORATION By: _______________________ Title: ADVANCES, MATURITIES AND PAYMENTS OF PRINCIPAL Date of Amount of Amount of Maturity Principal Paid Unpaid Principal Notation Date Advance of Advance or Prepaid Balance Made by ____ _______ __________ ______________ ________________ _______ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________
EXHIBIT A-2 FORM OF B NOTE * U.S. $__________________ Dated:____________, ____ FOR VALUE RECEIVED, the undersigned, OLIN CORPORATION, a Virginia corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of ___________________________________________________________________(the "Lender") for the account of its Applicable Lending office (as defined in the Credit Agreement referred to below),on _______________, ____, principal amount of ___________ Dollars ($__________________). The Borrower promises to pay interest on the unpaid principal amount hereof from the date hereof until such principal amount is paid in full, at the interest rate and payable on the interest payment date or dates provided below: Interest Rate: ________% per annum (calculated on the basis of a year of 360 days for the actual number of days elapsed) Interest Payment Date or Dates: Both principal and interest are payable in lawful money of the United States of America to the Lender at its Applicable Lending Office (as defined in the Credit Agreement referred to below) in same day funds. This Promissory Note is one of the B Notes referred to in, and is entitled to the benefits of, the Credit Agreement dated as of September 30, 1993 as amended and restated as of February 22, 1999 (as otherwise amended and in effect from time to time, the "Credit Agreement") among the Borrower and certain other banks parties thereto. The Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events. __________________ * Insert the dollar amount of the Lender's B Advance. 2 The Borrower hereby waives presentment, demand, protest and notice of any kind. No failure to exercise, and delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights. This Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York, United Sates. OLIN CORPORATION By _________________________ Title EXHIBIT B-1 NOTICE OF A BORROWING The Lenders parties to the Credit Agreement referred to below _______________________ _______________________ [Date] Attention:___________________________ Gentlemen: The undersigned, Olin Corporation, refers to the Credit Agreement, dated as of September 30, 1993 as amended and restated as of February 22, 1999 (as otherwise amended and in effect from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned and certain Banks parties thereto, and hereby gives you notice, irrevocably, pursuant to Section 2.02(a) of the Credit Agreement that the undersigned hereby requests a A Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such A Borrowing (the "Proposed A Borrowing") as required by Section 2.02(a) of the Credit Agreement: (i) The Business Day of the Proposed A Borrowing is ______________, ____. (ii) The Type of A Advances comprising the Proposed A Borrowing [is] [are] [Adjusted CD Rate Advances] [Base Rate Advances] [and] [Eurodollar Rate Advances], as set out below. (iii) The aggregate amount of the Proposed A Borrowing is $______________. 2 (iv) The Interest Period and principal amount for each A Advance made as part of the Proposed A Borrowing is as set out below: Type of A Advance Interest Period Principal ----------------- --------------- --------- * Amount ------ The undersigned hereby certifies that on the date hereof, and on the date of the Proposed A Borrowing, the sum of (a) the aggregate amount of the Proposed A Borrowing and all other A Borrowings to be made on the date of the Proposed A Borrowing, (b) the aggregate amount of all other outstanding A Borrowings, (c) the aggregate amount of all B Borrowings outstanding and (d) the aggregate amount of all B Borrowings to be made on the date of the Proposed A Borrowing, is less than or equal to the aggregate Commitments of the Lenders. Very truly yours, OLIN CORPORATION By______________________ Title _____________________ * More than one A Advance of the same Type may be requested. EXHIBIT B-2 NOTICE OF B BORROWING The Lenders parties to the Credit Agreement referred to below _______________________ _______________________ [Date] Attention:________________ Gentlemen: The undersigned, Olin Corporation, refers to the Credit Agreement, dated as of September 30, 1993 as amended and restated as of February 22, 1999 (as otherwise amended and in effect from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned and Banks parties thereto, and hereby gives you notice pursuant to Section 2.02 (b) of the Credit Agreement that the undersigned hereby requests a B Borrowing under the Credit Agreement, and in that connection sets forth in Schedules A and B below the terms on which such B Borrowing (the "Proposed B Borrowing") is requested to be made: SCHEDULE A ---------- (A) Date of B Borrowing (B) Aggregate Amount of B Borrowing (C) Interest Rate Basis (D) Time after which bids by any Lender cannot be accepted by the Borrower* (E)_____________________ __________________ * Time shall not be later than 10:30AM (New York City time). 2 SCHEDULE B ---------- Amount of Interest Maturity B Advance Payment Date(s) Dates --------------- -------- The undersigned hereby certifies that on the date hereof, and on the date of the Proposed B Borrowing the sum of (a) the aggregate amount of the Proposed B Borrowing and all other B Borrowings to be made on date of the Proposed B Borrowing, (b) the aggregate amount of all other outstanding B Borrowings, (c) the aggregate amount of all A Borrowings outstanding and (d) the aggregate amount of all A Borrowings to be made on the date of the Proposed B Borrowing, is less than or equal to the aggregate Commitments of the Lenders. The undersigned hereby confirms that the Proposed B Borrowings is, subject to the above, to be made available to it in accordance with Section 2.02(b) of the Credit Agreement. Very truly yours, OLIN CORPORATION By__________________ Title: EXHIBIT C --------- ASSIGNMENT AND ACCEPTANCE Dated ____________, ____ Reference is made to the Credit Agreement dated as of September 30, 1993 as amended and restated as of February 22, 1999 (as otherwise amended and in effect from time to time, the "Credit Agreement") among Olin Corporation, a Virginia corporation (the "Borrower"), and the Lenders (as defined in the Credit Agreement). Terms defined in the Credit Agreement are used herein with the same meaning. _______________________(the "Assignor") and ____________ (the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, the percentage interest specified on Schedule 1, hereto in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof (after giving effect to any other assignments thereof made prior to the date hereof, whether or not such assignments have become effective, but without giving effect to any other assignments thereof also made on the date hereof), including, without limitation, such percentage interest in the Assignor's Commitment [,] [and] the A Advances owing to the Assignor [, and the A Note[s] held by the Assignor] but excluding any amount payable to the Assignor pursuant to Section 8.04 of the Credit Agreement. 2. The Assignor (i) represents and warrants that as of the date hereof its Commitment (after giving effect to any other assignments thereof made prior to the date hereof, whether or not such assignments have become effective, but without giving effect to any other assignments thereof also made on the date hereof) is in the dollar amount specified as the Assignor's Commitment on Schedule 1, hereto and the aggregate outstanding principal amount of A Advances owing to it (after giving effect to any other assignments thereof made prior to the date hereof, whether or not such assignments have become effective, but without giving effect to any other assignments thereof also made on the date hereof) is in the dollar amount specified as the aggregate outstanding principal amount of A Advances owing to the Assignor on Schedule 1 hereto; (ii) represents and warrants that it is the legal and beneficial owner of the interest being ----- assigned by it hereunder and that such interest is free and clear of any adverse claim; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or 2 representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iv) confirms that it has not received a notice from the Borrower pursuant to Section 7.02(a) of the Credit Agreement that the assignee is not acceptable; [and] (v) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto [; and (vi) attaches the A Note[s] referred to in paragraph 1 above and requests that the Borrower exchange such A Note[s] for a new A Note payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto or new A Notes payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto and the Assignor in an amount equal to the Commitment retained by the Assignor under the Credit Agreement, respectively, as specified on Schedule 1 hereto]. 3. The Assignee (i) confirms that it is an Eligible Assignee or that it was a Lender prior to the effective date hereof; (ii) confirms that it has received a copy of the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (iii) agrees that it will, independently and without reliance upon the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; [and] (v) specifies as its CD Lending Office, Domestic Lending Office (and address for notices) and Eurodollar Lending office the offices set forth beneath its name on the signature pages hereof [and; (vi) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement [and the A Notes] or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty].* __________________ * If the Assignee is organized under the laws of a jurisdiction outside the United States. 3 4. Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered to the Borrower by the Assignee. The effective date of this Assignment and Acceptance shall be the date specified on Schedule 1 hereto (the "Effective Date"). 5. Upon such delivery to the Borrower, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Upon such delivery to the Borrower, from and after the Effective Date, the Borrower shall make all payments under the Credit Agreement [and the A Notes] in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement [and the A Notes] for periods prior to the Effective Date directly between themselves. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the Parties hereto have caused this Assignment and Acceptance to be executed by their respective officers thereunto duly authorized, as of the date first above written, such execution being made on Schedule 1 hereto. [NAME OF ASSIGNOR] By_____________________ Title: [NAME OF ASSIGNEE] By___________________ Title: CD Lending Office: [Address] 4 Domestic Lending Office (and address for notices): [Address] Eurodollar Lending Office: [Address] Received this _____ day of _______________, ____ by OLIN CORPORATION By_______________________ Title: Schedule 1 to Assignment and Acceptance Dated _____________, ____ Section 1. - --------- Percentage Interest*: _______% Section 2. - --------- Assignor's Commitment: $_______ Aggregate Outstanding Principal Amount of A Advances owing to the Assignor: $_______ An A Note payable to the order of the Assignee Dated: ____________, ____ Principal amount: ____________ An A Note payable to the order of the Assignor Dated: ___________, ____ Principal amount: ____________ Section 3. - --------- Effective Date**: ___________, ____ __________________ * This percentage must comply with the limitation in Section 7.02(a)(v). ** This date should be no earlier than the date of delivery of this Assignment and Acceptance to the Borrower by the Assignee. EXHIBIT D OPINION OF COUNSEL TO THE BORROWER February 22, 1999 To each of the Banks parties to the Credit Agreement dated as of September 30, 1993 as amended and restated as of February 22, 1999 among Olin Corporation and said Banks Olin Corporation ---------------- Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 3.01(d) of the Credit Agreement, dated as of September 30, 1993 as amended and restated as of February 22, 1999 (as otherwise amended and in effect from time to time, the "Credit Agreement"), among Olin Corporation (the "Borrower") and the Banks parties thereto. Terms defined in the Credit Agreement are used herein as therein defined. I have acted as counsel for the Borrower in connection with the preparation, execution and delivery of, and the initial Borrowing made under, the Credit Agreement. In that connection, I have examined: (1) The Credit Agreement. (2) The documents furnished by the Borrower pursuant to Article III of the Credit Agreement. (3) The restated articles of incorporation of the Borrower and all amendments hereto (the "Charter"). (4) The by-laws of the Borrower and all amendments thereto (the "By-laws"). 2 (5) A certificate of the Virginia State Corporation Commission, dated February 18, 1999, attesting to the continued corporate existence and good standing of the Borrower in that State. In addition, I have examined the originals, or copies certified to my satisfaction, of such other corporate records of the Borrower, certificates of public officials and of officers of the Borrower, and agreements, instruments and other documents, as I have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, I have, when relevant facts were not independently established by me, relied upon certificates of the Borrower or its officers or of public officials. I have assumed the due execution and delivery, pursuant to due authorization, of the Credit Agreement by the Banks. Based upon the foregoing and upon such investigation as we have deemed necessary, I am of the following opinion: 1. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia. 2. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Charter or the By-laws (ii) any law (including, without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System) or (iii) the provisions of any material agreement of the Borrower listed as an exhibit to the most recent annual report of the Borrower on Form 10-K or subsequent SEC filings of the Borrower. The Credit Agreement and the A Notes have, and the B Notes, when executed and delivered by the Chairman of the Board and President, any Vice President and Treasurer or any Assistant Treasurer of the Borrower, will have been duly executed and delivered on behalf of the Borrower. 3. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due 3 execution, delivery and performance by the Borrower of the Credit Agreement and the notes. 4. The Credit Agreement and the A Notes are, and the B Notes when executed and delivered as described in Paragraph 2 above, will be, the legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms. 5. There are no actions, suits or proceedings pending or, to the best of my knowledge, threatened against the Borrower or any Subsidiary the reasonably anticipated outcome of which would materially and adversely affect the ability of the Borrower to perform its obligations under the Credit Agreement or any Note or which purports to affect the legality, validity or enforceability of the Credit Agreement or any Note. 6. Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940. The opinions set forth above are subject to the following qualifications: (a) My opinion in paragraph 4 above is subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditor's rights generally. (b) My opinion in paragraph 4 above is subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). I am a member of the bar of the State of Connecticut. The law covered by this opinion is limited to the laws of the State of Connecticut, the Virginia Stock Corporation Act of the Commonwealth of Virginia and the laws of the United States of America. I have assumed for the 4 purpose of this opinion that the substantive law of the State of New York is identical in all material respects to the substantive law of the State of Connecticut. Very truly yours, Johnnie M. Jackson, Jr. EXHIBIT E ASSUMPTION AGREEMENT Dated _______________, ____ Reference is made to the Credit Agreement dated as of September 30, 1993 as amended and restated as of February 22, 1999 (as otherwise amended and in effect from time to time, the "Credit Agreement"), among Olin Corporation, a Virginia corporation (the "Borrower"), and the Lenders (as defined in the Credit Agreement). Terms defined in the Credit Agreement are used herein with the same meaning. 1. ____________________ (the "Assuming Bank") hereby assumes, as of the Effective Date hereinafter referred to, the Commitment under the Credit Agreement set forth opposite its name on the signature page hereof. 2. The Assuming Bank (i) confirms that it meets the criteria for an Eligible Assignee; (ii) confirms that it has received a copy of the Credit Agreement, together with copies of the most recently delivered financial statements referred to in Section 5.01(g) thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assumption Agreement; (iii) agrees that it will, independently and without reliance upon any other Lender and based on, such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; [and] (v) specifies as its CD Lending Office, Domestic Lending Office (and address for notices) and Eurodollar Lending Office the offices set forth beneath its name on the signature pages hereof [and; (vi) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assuming Bank's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assuming Bank under the Credit Agreement [and the A Notes] or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty).* __________________ * If the Assuming Bank is organized under the laws of a jurisdiction outside the United States. 2 3. The effective date of this Assumption Agreement shall be the date specified below (the "Effective Date"). 4. As of the Effective Date, the Assuming Bank shall be a party to the Credit Agreement and have the rights and obligations of a Lender thereunder. 5. From and after the Effective Date, the Borrower shall make to the Assuming Bank all payments due the Assuming Bank as a Lender under the Credit Agreement [and the A Notes held by the Assuming Bank] (including, without limitation, all payments of principal, interest and commitment fees with respect thereto). 6. This Assumption Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the Assuming Bank has caused this Assumption Agreement to be executed by its officer thereunto duly authorized, as of the date first above written. [NAME OF ASSUMING BANK] Effective Date:_____________ $ By_____________________ Title CD Lending Office; [Address] Domestic Lending Office (and address for notices): [Address) Eurodollar Lending Office: [Address) 3 Received this ______________________ day of __________________, ____ by OLIN CORPORATION By_______________________ Title: EX-10.C 4 EMPLOYEE DEFERRAL PLAN EXHIBIT 10(c) OLIN CORPORATION EMPLOYEE DEFERRAL PLAN As Amended and Restated Effective February 8, 1999 1. PURPOSE ------- The purpose of this Olin Corporation Employee Deferral Plan (the "Plan") is to provide eligible employees of Olin Corporation 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. The Plan is amended and restated to reflect the distribution to Olin's shareholders of all of the outstanding shares of common stock of Arch Chemicals, Inc., effective as of the date of such distribution. 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 Senior Vice President, Corporate Affairs or his delegate. (c) "Arch" means Arch Chemicals, Inc., a Virginia corporation and any successor thereto. (d) "Arch Common Stock" means shares of common stock of Arch, par value $1.00 per share. (e) "Arch Employee" means an employee of Arch. (f) "Arch Employee Deferral Plan" means the Arch Chemicals, Inc. Employee Deferral Plan. (g) "Arch Stock Account" means the Stock Account to which Arch Stock Units are credited. (h) "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. (i) "Beneficiary" means the person(s) designated by the Participant in accordance with Section 10. 2 (j) "Board" means the Board of Directors of the Company. (k) "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. (l) "Change in Control" means that any of the following events shall have occurred: (i) the Company ceases to be, directly or indirectly, owned by at least 1,000 shareholders; (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; or (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; or (iv) the Company's Board of Directors determines that a tender offer for the Company's shares indicates a serious intention by the offeror to acquire control of the Company. (m) "Committee" means the Compensation Committee (or its successor) of the Board. (n) "Common Stock" means the Company's common stock, $1.00 par value per share. (o) "Company" means Olin Corporation, a Virginia corporation, its divisions and subsidiaries. 3 (p) "Compensation" means any employee compensation which represents salary, severance pay, bonus, or any other incentive plan payout, in the form of cash or stock, including but not limited to payouts or payment distributions from the EVA Incentive Plan, Performance Unit Plan and 1991 Olin Long Term Incentive Plan but excluding stock resulting from employee stock option exercises and excluding other incentive payouts which the Administrator determines prospectively not eligible to be deferred under this Plan. (q) "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. (r) "Corporate Human Resources" means the Corporate Human Resources Department of the Company. (s) "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. (t) "Deferred Compensation" means the Compensation elected by the Participant to be deferred pursuant to the Plan. (u) "Distribution" means the distribution of all outstanding shares of Arch Common Stock to the shareholders of the Company. (v) "Distribution Date" means the dividend payment date fixed by the Board for the Distribution. (w) "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. (x) "Employee" means a full-time, active salaried employee (which term shall be deemed to include officers) 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. (y) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (z) "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 Arch Common Stock, as the case may be, as reported on the consolidated tape of the New York Stock Exchange on such date or if the New York Stock Exchange is closed on such date, the next succeeding date on which it is open. 4 (aa) "Fiscal Year" means that annual period commencing January 1 and ending the following December 31. (bb) "Olin Stock Account" means the Stock Account to which Olin Stock Units are credited 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 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 Prior Plans which has been transferred to this Plan. (ee) "Plan" means this Olin Corporation Employee Deferral Plan. (ff) "Prior Plans" mean the deferral plans and arrangements utilized by present and past employees or consultants for the deferral of payouts or distributions of salary, bonuses (other than Bonus bank amounts under the EVA Incentive Plan), performance shares, performance units and retention units, all which were replaced by this Plan as of the effective date of this Plan identified in Section 17. (gg) "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. (hh) "Section 16(b) Employee" means an Employee or former Employee who is subject to Section 16(b) of the Exchange Act. (ii) "Stock Account" means an account established under the Plan to which shares of Common Stock and Arch Common Stock have been or are to be credited in the form of Olin Stock Units and Arch Stock Units, which shall include the Olin Stock Account and the Arch Stock Account. (jj) "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. 5 (kk) "Termination" means retirement from the Company or termination of services as an Employee for any other reason; provided, however, that an -------- ------- Employee will not be considered to have incurred a Termination if he or she ceases to provide services to the Company as a result of becoming an Arch Employee. 3. SHARES; ADJUSTMENTS IN EVENT OF CHANGES IN CAPITALIZATION --------------------------------------------------------- (a) Shares Authorized for Issuance. There shall be reserved for issuance under the Plan 100,000 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 Arch 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 Olin Stock Units or Arch 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 Olin Stock Account. Stock-based Compensation may only be deferred to an Olin 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) Olin Stock Account. If a Participant elects to invest all or any portion of his or her Deferred Compensation in the Olin Stock Account, that portion of the Participant's Compensation Account shall be credited on the Credit Date with Olin 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 Olin Stock Account shall be credited with the number of Olin 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 Arch Common Stock, a Participant 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 Olin Stock Units or Arch 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 Arch Common Stock, as applicable, multiplied by (b) the number of Stock Units credited to the Participant's applicable Stock Account as of the dividend 7 record date by (ii) the Fair Market Value of a share of Common Stock or Arch 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) Prior Plans. A Participant who had an existing deferred account under the Prior Plans shall automatically have such account transferred to a Compensation Account under this Plan to be maintained and administered pursuant to the terms and conditions of this Plan. A cash account of a Prior Plan shall be transferred to the Cash Account maintained under the Plan for such Prior Plan and a stock account for a Prior Plan shall be transferred to the Olin Stock Account maintained under this Plan for such Prior Plan. (e) Adjustment for Distribution. Immediately prior to the Distribution, the terms of the Olin Stock Units held in the Olin Stock Accounts of each Participant who will become an Arch Employee shall be amended to provide that such shares shall be paid out in cash based on the Fair Market Value of Olin Stock Units at the time of distribution to the Arch Employees. As of the Distribution Date, the Arch Stock Account of each Participant on such date shall be credited with the number of Arch Stock Units that the Participant would have received in the Distribution Date had the Participant owned directly the number of shares of Common Stock represented by the Olin Stock Units held in his or her Olin Stock Account. As of the Distribution Date, the Cash Account and Stock Account of each Arch Employee (after giving effect to the adjustment described in this Section 6(e)) shall be transferred to the Arch Employees Deferral Plan provided that the Arch Employee provides the Company with a release, acceptable to the Committee, waiving all rights to benefits under 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 Arch Stock Account after the Distribution Date. (f) 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 ------------------ 8 (a) General. Any Employee selected by the Administrator to participate in the Plan may elect to do so in any Fiscal Year by delivering to Corporate Human Resources a written notice on a form prescribed by Corporate Human 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 Olin 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. 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 Olin 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 Arch 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. 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 Olin 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 Stock Units will be determined by (i) multiplying the number of Olin Stock Units or Arch Stock Units 9 attributable to such installment (determined as hereinafter provided) by (ii) the Fair Market Value of a share of Common Stock or Arch 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 Olin Stock Units or Arch Stock Units, as applicable, attributable to an installment shall be determined by multiplying (i) the current number of Olin Stock Units or Arch 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 Olin Stock Account shall be determined by multiplying (i) the current number of Olin 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 Olin 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 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 10 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 Change in Control. For this purpose, the balance in the portion of a Participant's Compensation Account invested in the Olin Stock Account or Arch 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 Arch 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 Arch 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 ----- 11 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 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. 12 14. GOVERNING LAW ------------- The provisions of this plan shall be interpreted and construed in accordance with the laws of the Commonwealth of Virginia, 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 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 became effective as of November 1, 1997, and is amended and restated in this document effective as of the Distribution Date. EX-10.D 5 SENIOR EXECUTIVE PENSION PLAN EXHIBIT 10(d) OLIN SENIOR EXECUTIVE PENSION PLAN (Restated as of September 1, 1995) Article I. The Plan -------------------- 1.1 Establishment of Plan. Olin Corporation (the "Company") hereby ---------------------- restates its Olin Senior Executive Pension Plan, originally adopted by the Board of Directors on September 27, 1984. The Effective Date of this restatement is September 1, 1995. 1.2 Purpose. The purpose of this Plan is to attract and retain a -------- management group capable of assuring Olin'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 employee of the Company or its subsidiaries -------------- (collectively referred to as "Employing Companies") whose job is rated at 2,000 Hay Points (or the equivalent) or more, and who is selected by the Compensation Committee (prior to April 24, 1997, the Compensation and Nominating Committee), (referred to in this Plan as the "Selection Committee"), shall participate in the Plan. 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 herefrom. Article III. Benefits --------------------- 3.1 Benefit Formula. --------------- 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 his Years of Benefit Service credited while the employee was a Participant in this Plan, plus one and one-half percent (1/2%) of the Participant's Average Compensation multiplied by his Years of Benefit Service credited under all qualified plans of Olin Corporation or its affiliates while the employee was not a Participant in this 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 begin prior to his sixty-second (62nd) birthday; -1- reduced by the sum of (i) the Participant's annual retirement allowance payable from all Olin qualified and nonqualified defined benefit pension plans of the Company and all Employing Companies, including, without limitation, the Olin Corporation Employees Pension Plan which was previously known as the Nonbargaining Employees' Pension Plan of Olin Corporation and prior to that as the Olin Salaried Pension Plan, and the Certain Defense Operations for Non-Bargaining Units Plan (all such plans being collectively referred to in this Plan as the "Olin 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 Olin Plans"); and (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 Olin Employees Pension Plan and all Other Olin 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 this benefit formula, "Average Compensation", "Years of Benefit Service", "Retirement Allowance" and "Primary Social Security Benefit" shall have the same definition as that contained in the Olin Employees Pension Plan; provided, however, that (i) "Average Compensation" under this Plan shall include deferred amounts of regular salary and deferrals under management incentive plans (other than the Performance Unit Plan, the EVA Bonus Bank and other long-term incentive and long-term bonus plans); (ii) Average Compensation of Participants whose employment is being transferred directly to Primex Technologies, Inc. or its affiliates ("Primex") (or who transfer directly within five (5) years following the spin-off of Primex) shall be determined taking into account reasonable compensation paid by Primex (as determined by the Plan Administrator of this Plan); (iii) in calculating Average Compensation, 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; (iv) Average Compensation shall be calculated without regard to the dollar limitations imposed by Section 401(a)(17) of the Internal Revenue Code; and (v) "Years of Benefit Service" shall include service imputed as a result of treating executive -2- severance as having been received over the number of months of salary used to calculate such severance. (d) The annual retirement allowances payable under the Olin Employees Pension Plan, Other Olin Plans and from pension plans of the Participant's previous employers, which are to be used to reduce the benefit payable under (a) or (b) above, shall be determined assuming (i) that the Participant selected a 50% joint and survivor annuity under such plans, (ii) began 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 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. In the case of Participants who transfer directly to Primex or Arco Chemical Company ("Arco") (or who, in the case of Primex only, transfer directly to Primex within five (5) years of the spin-off of Primex), (i) "actual retirement" shall be construed to mean retirement or termination of service from Primex or Arco and their affiliates, as the case may be, and (ii) service with Primex or Arco (and their affiliates) shall be credited in enabling the Participant to attain his early retirement age (but not in determining Years of Benefit Service) under this Plan. (b) For purposes of (i) determining whether a Participant has reached his fifty-fifth (55th) birthday and, thus, is eligible to commence benefits under this Section 3.2 instead of on a deferred vested basis, and (ii) calculating the annual retirement allowance from the Olin 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 Olin Employees Pension Plan) and who is at least age fifty-two (52) and 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 active Employee until age fifty-five (55). 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 all Employing Companies prior to having reached age fifty-five (55) may commence benefits under this Plan only after having reached age sixty-five (65); provided however that, in the case of Participants who transfer directly to Primex or -3- Arco, service with those respective companies and their affiliates shall be counted in enabling such Participants to retire on or after attaining age fifty-five (55) and actually retiring from Primex or Arco, as the case may be, in accordance with Section 3.2 above. In the case of a deferred vested Participant, benefits paid from this Plan will assume that the Participant did not commence benefits under the Olin Employees Pension Plan until he or she reached age sixty-five (65), even though the Participant may actually commence benefits under the Olin Employees Pension Plan prior to that date. 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 Olin 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 Olin 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 Olin Corporation or its affiliates. Article IV. Payment of Benefits -------------------------------- 4.1 Payment Provisions for Current and Future Retirees. --------------------------------------------------- (a) Subject to the Minimum Benefit Accumulation threshold requirement of Section 4.4, the actuarial present value of the Retirement Allowance of Participants who are already retired as of September 1, 1995, determined in accordance with the actuarial assumptions hereinafter provided, shall be paid, at the election of the Chairman of the Board of Directors of the Company, and in the case of the Chairman, the Selection Committee, either in a single sum, in up to three (3) annual installments, or in a combination of an annuity and either a single lump sum or installments (such single sum or annual installments being referred to in this Plan as "Accelerated Benefits"). Such Accelerated Benefits shall commence as of (a) October 31, 1996, in the case of Participants who are retired as of September 1, 1995, and (b) at least twelve months following the Participant's actual retirement, in the case of future retirees (such dates being referred to as the Participant's "Accelerated Benefit Commencement Date"). If a Participant's benefits under this Plan are already in pay status in accordance with the terms of Section 4.3 of the Plan, such benefits will remain in pay status until the Participant's Accelerated Benefit Commencement Date. -4- (b) Alternatively, the retired Participant may elect, at least one full year prior to such Accelerated Benefit Commencement Date, to receive his entire benefit in the form of an annuity in accordance with Section 4.3 of this Plan. 4.2 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, 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. In the case of Participants who transfer directly to Primex or Arco (or who, in the case of Primex only, transfer directly to Primex within five (5) years of the spin-off of Primex), "actual retirement" shall be construed to mean retirement or termination of service from Primex or Arco and their affiliates, as the case may be. (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 Chairman of the Board of Directors of the Company, and in the case of the Chairman, the Selection Committee, either in a single sum, in up to three (3) annual installments, or in a combination of annuity payments and either a single sum or annual installments, provided, however, that no monthly benefits shall be paid to Participants who transfer to Primex or Arco until they separate from service with Primex or Arco, respectively. (c) Alternatively, the actively employed Participant may elect, at least one full year prior to such Accelerated Benefit Commencement Date, to receive his entire benefit in the form of an annuity in accordance with Section 4.3 of this Plan. 4.3 Payment of Regular Monthly Benefits. ------------------------------------ (a) Participants retiring from active service from all Employing Companies may elect to receive regular monthly benefits in lieu of receiving Accelerated Benefits or -5- 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 all Employing Companies before reaching age 55 may not commence benefits under this Plan prior to reaching age 65 unless (i) he is eligible for "lay-off credit" pursuant to Section 3.2(b) and, thus, is deemed to qualify for early retirement benefits or (ii) he receives service credit for purposes of enabling him to retire on or after age 55 as provided in the next sentence. In the case of Participants who transfer directly to Primex or Arco, service with those respective companies and their affiliates shall be counted in enabling such Participants to retire on or after attaining age fifty-five (55). 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 foregoing provisions of Section 4.3(b), will be calculated assuming that the Participant did not commence benefits under the Olin Employees' Pension Plan until reaching age 65, even though his actual commencement date under the Olin 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 -6- (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 Olin Supplementary Pension Plan and the Olin 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. 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 in effect with respect to the Participant. -7- (b) The Surviving Spouse of any Participant who dies prior to benefit ----- commencement shall be entitled to receive a benefit equal to 50% of the benefit that the Participant would have been entitled to had he survived to the earliest date on which he could commence benefits hereunder, retired and commenced monthly regular benefits under the Plan, and then died the next day. (c) Notwithstanding (a) or (b) 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. (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. 4.6 Benefit Upon a Change of Control. -------------------------------- (a) Lump Sum Payment Upon a Change of Control. ----------------------------------------- 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" shall be deemed to have occurred if -8- (i) Olin ceases to be a publicly owned corporation with at least 1000 stockholders; or (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 Sections 13(d)(3) and 14(d)(2) 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 Olin, becomes 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 Board of Directors of the Company (together with any new Director whose election by the 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) the Company's Board of Directors determines that a tender offer for the Company's shares indicates a serious intention by the offeror to acquire control 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 Selection Committee at any time "for cause", as determined by the Selection Committee in its sole discretion, whether or not the Participant has begun to receive payments under the Plan, and whether or not the Participant's employment has been terminated. "Cause" shall include, without limitation, rendering services in any capacity to a competitor of the Company or Employing Company without the consent of the Selection 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. -9- (b) The Selection Committee may notify a Participant that he or she is being suspended from the Plan as a result of job performance which the Selection 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 the Employing Company of the Participant. 5.2 Liability for Payment. Each Employing Company shall pay the --------------------- benefits provided under this Plan with respect to Participants who are employed, or were formerly employed by it during their participation in the Plan. In the case of a Participant who was employed by more than one Employing Company, the Committee shall allocate the cost of such benefits among such Employing Companies in such manner as it deems equitable. The obligations of the Employing Company shall not be funded in any manner. 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 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. -10- 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; (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. -11- 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 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 or any duly authorized committee or officer. Any Employing Company may withdraw from participation in the Plan at any time. No amendment or termination of the Plan or withdrawal therefrom by an Employing Company shall adversely affect the vested benefits payable hereunder to any Participant for service rendered prior to the effective date of such amendment, termination or withdrawal. Article VIII. Miscellaneous ---------------------------- 8.1 Gender and Number. Whenever any words are used herein in the ------------------- masculine, feminine or neuter gender, they shall be construed as though they were also used in another gender in all cases where such would apply, and whenever any words are used herein in the singular or plural form, they shall be construed as though they were also used in another form in all cases where they would so apply. 8.2 Action by the Company. Whenever the Company under the terms of --------------------- this Plan is permitted or required to do or perform any act or thing, it shall be done and performed by an officer or committee duly authorized by the Board of Directors of the Company. 8.3 Headings. The headings and subheadings of this Plan have been --------- inserted for convenience of reference only and shall not be used in the construction of any of the provisions hereof. 8.4 Uniformity and Non Discrimination. All provisions of this Plan ---------------------------------- shall be interpreted and applied in a uniform nondiscriminatory manner. 8.5 Governing Law. To the extent that state law has not been -------------- preempted by the provisions of ERISA or any other laws of the United States heretofore or hereafter enacted, this Plan shall be construed under the laws of the State of Connecticut. -12- 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. OLIN CORPORATION By: __________________________ Its -13- EX-10.E 6 CONTRIBUTING EMPLOYEE OWNERSHIP PLAN EXHIBIT 10(e) OLIN SUPPLEMENTAL CONTRIBUTING EMPLOYEE OWNERSHIP PLAN EFFECTIVE JANUARY 1, 1990, AS AMENDED MAY 6, 1994 AND JANUARY 30, 1998 AND RESTATED AS OF SEPTEMBER 24, 1998 Olin Corporation ("Olin") hereby restates the Olin Supplemental Contributing Employee Ownership Plan (the "Plan" or "SCEOP"), effective September 24, 1998. The Plan was originally effective as of January 1, 1990 and was amended as of May 6, 1994 and January 30, 1998. 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"). The purpose of this Plan is to provide certain eligible executive employees, whose contributions to the Olin Corporation Contributing Employee Ownership Plan (as from time to time amended, 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) "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%). (b) "Company" means Olin Corporation. (c) "Compensation" shall have the same meaning as under the CEOP, except that it shall not be subject to the maximum dollar limitation on compensation taken into account for purposes of the CEOP under Section 401(a)(17) of the Code. (d) "Dividend Equivalents" means (i) with respect to Olin Phantom Units held in a SCEOP Account, 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 (ii) effective as of December 31, 1996, with respect to Primex Phantom Units held in a SCEOP Account, 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 Stock") reflected in such Primex Phantom Units. Any Dividend Equivalents issued with respect to Primex Phantom Units shall be deemed reinvested in Olin Phantom Units and not Primex Phantom Units. (e) "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 Supplemental Plan Contribution for that Participant; provided that, if the participant's CEOP Percentage exceeds six percent (6%), the Supplemental Plan Contribution will be calculated using six percent (6%) for the CEOP Percentage when calculating the Excess Company Matching Contribution. (f) "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 CEOP for that year, if any, by (ii) the Supplemental Plan Contribution of that Participant for such year; provided that if such Participant's CEOP Percentage exceeds six percent (6%), the Supplemental Plan Contribution will be calculated using six percent (6%) for the CEOP Percentage when calculating the Excess Performance Contribution. (g) "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. (h) "Olin Phantom Units" means phantom units of the CEOP's Olin Common Stock Fund held in the SCEOP, such units consisting of both Olin Stock and cash. (i) "Plan Year" shall mean a twelve-month period ending on December 31. (j) "Primex Phantom Units" means, effective on and after December 31, 1996, phantom units of the CEOP's Primex Stock Fund held in the SCEOP, such units consisting of both Primex Stock and cash. (k) "SCEOP Participant" with respect to a month in a Plan Year shall mean a Participant 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. (l) "SCEOP Account" for a SCEOP Participant shall mean the Account established under the SCEOP for such Participant holding Olin Phantom Units and/or Primex Phantom Units, and/or any other phantom securities or units created herein. (m) "Supplemental Plan 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. 2.2 Each Eligible Employee wishing to participate in this Plan must execute and file a salary reduction agreement in a form acceptable to the Plan Administrator. Such agreement to reduce Compensation shall be made 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, and shall remain in effect for subsequent Plan Years unless revoked by the Participant in writing in a form acceptable to the Plan Administrator. Notwithstanding the foregoing, for the Plan Year in which a Participant first becomes eligible to participate in the Plan, a Participant may make such election within 30 days after he becomes eligible. 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 SCEOP Participant who so elects for a Plan Year shall defer the Supplemental Plan Contribution 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. For each Plan Year during which a person is a SCEOP Participant and making deferrals, the Participating Employer will credit to the SCEOP Account of each SCEOP Participant the number of Olin Phantom Units equal in value to the sum of (1) the Supplemental Plan 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 Supplemental Plan 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. The SCEOP Account will also be credited with Dividend Equivalents from time to time, in the form of additional Olin Phantom Units when dividends are paid (i) on the actual number of shares of Olin Common Stock reflected in the Olin Phantom Units held in such Account and (ii) on the actual number of shares of Primex Stock reflected in Primex Phantom Units held in such Account. 3.2 For purposes of calculating the number of Olin Phantom Units to be credited to a Participant's SCEOP Account, the SCEOP shall use the Current Market Value for valuing units in the Olin Common Stock Fund as defined under the CEOP. Olin and Primex Phantom Units will be credited in fractional amounts up to three decimal places. 3.3 As a result of the spin-off of Primex, Participants' SCEOP Account Balances deemed invested in Olin Phantom Units shall be credited with a dividend deemed invested in Primex Phantom Units. For each Olin Phantom Unit credited to a Participant's SCEOP Account as of December 31, 1996, he shall be credited with a dividend equal to the then current value of the Olin Common Stock Fund, multiplied by a fraction, the numerator of which is equal to one-tenth of the closing price of Primex Common Stock on the NASDAQ on December 31, 1996, and the denominator of which is equal to the closing price of Olin Common Stock on the New York Stock Exchange on December 31, 1996. The number of Primex Phantom Units deemed credited to a SCEOP Participant's Account as a result of the crediting of the dividend described above shall be determined by dividing the amount of such dividend by the Current Market Value of a unit in the Primex Common Stock Fund under the CEOP on December 31, 1996. No new investment shall be permitted in Primex Phantom Units. 3.4 SCEOP Participants may either retain their Primex Phantom Units or may have their entire Primex Phantom Unit Account Balance deemed transferred at the then Current Market Value and reinvested in Olin Phantom Units at the then Current Market Value. Once Primex Phantom Units are deemed transferred and reinvested, a Participant may not re-direct investment back into Primex Phantom Units. No new investment, whether in the form of Company or Participant contributions or Dividend Equivalents, shall be permitted in Primex Phantom Units. 3.5 A Participant shall be fully vested in his Supplemental Plan 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. Nevertheless, 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. 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. 3.6 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 Olin Common Stock, Primex Stock, or any other securities of Olin or Primex, issuance of warrants or other rights to purchase Olin Common Stock or other securities or Olin or Primex, or other similar corporate transaction or event affects Olin 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 Olin 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. 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, Olin Corporation and any other corporation in the same controlled group with Olin Corporation (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. Subject to the provisions of Section 4.2, a Participant's SCEOP Account will be distributed in the form elected under Section 4.3 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. 4.2 Each Participant whose employment is transferred from the Company to Primex, in connection with the spin-off of Primex, shall be fully vested in his or her SCEOP Account Balance. Such Balance shall continue to be credited with Dividend Equivalents until it is distributed; however, no such Balance may be distributed until such Participant terminates active service with Primex and its subsidiaries. 4.3 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. 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. 4.4 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. 4.5 Distributions to a SCEOP Participant of his SCEOP Account Balance shall be made only in the form of cash. Except as provided in Section 7.3, the value of the amount of any distribution shall be based on the Current Market Value of units in the Olin Common Stock Fund and, if applicable, 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. 4.6 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 Each 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; (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 the 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. For purposes of this paragraph, "Change in Control" shall mean that any of the following events shall have occurred: (i) Olin ceases to be a publicly owned corporation with at least 1,000 stockholders; or (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 Sections 13(d)(3) and 14(d)(2) 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 Olin, becomes 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 Board of Directors of the Company (together with any new Director whose election by the 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) the Company's Board of Directors determines that a tender offer for the Company's shares indicates a serious intention by the offeror to acquire control 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 Olin Common Stock reflected in a Participant's Olin Phantom Units by the greater of (a) the highest Current Market Value of the Common Stock (as defined in the CEOP Plan) on any date within the period commencing thirty (30) days prior to such Change in Control and ending on the date of the Change in Control, or (b) if the Change in Control occurs as a result of a tender or exchange offer or consummation of a corporate transaction, then the highest price paid per share of Common Stock pursuant thereto; (ii) adding any cash portion attributable to a Participant's Olin 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 Primex 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 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, Olin Corporation has caused this Plan to be executed by its duly authorized officer as of September 24, 1998. OLIN CORPORATION By:_____________________________ Its EX-10.H 7 EXECUTIVE AGREEMENT Exhibit 10(h) EXECUTIVE AGREEMENT ------------------- Agreement between Olin Corporation, a Virginia corporation ("Olin"), and _________________ (the "Executive"), dated as of December 10, 1998. Olin 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 duties; the willful engaging by the Executive in gross misconduct significantly and demonstrably financially injurious to Olin; or willful misconduct by the Executive in the course of his 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 Olin or not opposed to the interests of Olin. (b) "Change in Control" means: (i) Olin ceases to be, directly or indirectly, owned 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 Olin, a majority-owned subsidiary of Olin or an employee benefit plan (or the plan's related trust) of Olin 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 Olin; (iii) During any period of two consecutive years, individuals who at the beginning of such period constitute Olin's Board of Directors (together with any new Director whose election by Olin's Board of Directors or whose nomination for election by Olin'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 Olin is disposed of pursuant to a merger, consolidation or other transaction in which Olin is not the surviving corporation or Olin combines with another company and is the surviving corporation (unless the shareholders of Olin immediately following such merger, consolidation, combination, or other transaction beneficially own, directly or indirectly, more than 50% 1 of the aggregate voting stock or other ownership interests of (x) the entity or entities, if any, that succeed to the business of Olin or (y) the combined company) or (v) Approval by Olin's shareholders of (i) a sale of all or substantially all the assets of Olin or (ii) a liquidation or dissolution of Olin. (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 Olin's 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 Olin's 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 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) Olin has entered into an agreement the consummation of which would result in a Change in Control; (ii) any person (including Olin) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; (iii) Olin learns that any person (other than an employee benefit plan of Olin or a subsidiary of Olin (or the plan's related trust)) has become the beneficial owner directly or indirectly of securities of Olin representing 9.5% or more of the combined voting power of Olin's then outstanding securities ordinarily entitled to vote in elections of directors; or (iv) the Board of Directors of Olin adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of Olin has occurred; provided, if an event specified in clause (iii) above has occurred by or on the date hereof, such event shall not be deemed a Potential Change in Control unless such person acquires 2 another 1% of such securities subsequent to the date hereof. (f) "Termination" means: (i) The Executive is discharged by Olin other than for Cause; (ii) The Executive terminates his or her employment in the event that: (1) Olin 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 Olin's corporate headquarters is not a basis for Termination; (2) Olin 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 Olin's 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) Olin 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 Olin's 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 Olin for a period of at least 180 consecutive days; (5) Following a Change in Control, Olin fails to substantially maintain its benefit plans as in effect at the time of the Change in Control, unless reasonably equivalent arrangements (embodied in an on-going substitute or alternative plan) have been made with respect to such plans; or (6) The Executive's duties, position or reporting responsibilities are diminished. For purposes solely of clarification, it is understood that (i) if, in connection with the spinoff of an Olin business or Olin's assets as a separate public company to Olin's shareholders, the Executive accepts employment with, and becomes employed at, the 3 spunoff company or its affiliate, the termination of the Executive's employment with Olin shall not be considered a "Termination" for purposes of this Agreement provided a Change in Control shall not have occurred prior to the termination of the Executive's employment with Olin and (ii) except as provided in paragraph 5(f), in connection with the sale of an Olin business to a third party or the transfer or sale of an Olin business or Olin's assets to a joint venture to be owned directly or indirectly by Olin with one or more third parties, if the Executive accepts employment with, and becomes employed by, such buyer or its affiliate or such joint venture or its affiliate in connection with such transaction, such cessation of employment with Olin 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 October 3, 1997 between Olin and the Executive. 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 Change in Control, in which case this Agreement will expire on the later of (i) the close of business on September 30, 2002, (ii) or 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 Olin, 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 Olin, the Executive shall devote his or her full time efforts during normal business hours to Olin's 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 Olin's interest, provided that no additional position as director or member shall be accepted by the Executive during the period of his employment with Olin without its prior consent. (c) The Executive agrees that in the event of any Potential Change in Control of Olin occurring from time to time after the date hereof, the Executive will remain in the employ of Olin 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. 4. Executive Severance Payment 4 (a) In the event of a Termination occurring before the expiration of this Agreement, Olin 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, Olin 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 Olin. 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 Olin 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 Olin. If on the Termination date the Executive is eligible and is receiving payments under any then existing Olin 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 Olin disability plan. (f) In the event the Executive, in connection with the sale of an Olin business to a third party or the transfer of an Olin business or Olin assets to a joint venture which would be owned directly or indirectly by Olin with one or more third parties, ceases to be employed by Olin and with Olin's consent becomes employed by the buyer or its affiliate or the joint venture or its affiliate, the Executive shall be entitled to the benefits provided under paragraph 4(a) (using Olin 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 5 Termination as defined in paragraph 1(f) with his new employer (with the new employer being substituted for Olin 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 Olin. 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 Olin Pension Plans for which the Executive was eligible at the time of the Termination (i.e., under Olin's qualified Pension Plans to the extent permitted under then applicable law, otherwise such credit will be reflected in a supplementary pension payment from Olin 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 Olin 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 6 any period after the Executive's sixty-fifth birthday. (d) In the event of a Termination, the Executive will be entitled at Olin's expense to outplacement counseling and associated services in accordance with Olin's 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 Olin in lieu thereof will not be available to the Executive. (e) Notwithstanding the provisions of Section 10 of the Olin Senior Executive Pension Plan (the "Senior Plan"), if the Executive is in active employment with Olin 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 Olin pension plans assuming the Executive had terminated his or her employment with Olin 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 Olin at age 55 under the early retirement provisions of the Olin 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 Olin 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 Olin 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 Olin's 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 7 reaches age 65; provided that if the Executive obtains other employment which offers medical or dental coverage to the Executive and his or her dependents, the Executive shall enroll in such medical or dental coverage, as the case may be, and the corresponding coverage provided to the Executive hereunder shall be secondary coverage to the coverage provided by the Executive's new employer so long as such employer provides the Executive with such coverage. (g) If there is a Change in Control, Olin 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 Olin. 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 Olin 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 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 Olin 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 Olin 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. 8 7. Successors; Binding Agreement (a) Olin 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 Olin, by agreement, in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that Olin would be required to perform if no such succession had taken place. Failure of Olin 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 Olin 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, "Olin" means Olin 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: Olin Corporation 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 9 writing signed by the Executive and Olin. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. 11. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same Agreement. 12. Withholding of Taxes. Olin 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 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, Olin 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 Olin. 15. Disputes/Arbitration. (a) Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration at Olin's 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) Olin 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 claim. Should Olin dispute the entitlement of the Executive to such fees and expenses, the burden of proof shall be on Olin to establish that the Executive had no reasonable basis for his claim. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed 10 and delivered as of the day and year first above set forth. OLIN CORPORATION By: ______________________________ Donald W. Griffin Chairman of the Board, President and Chief Executive Officer _________________________ 11 EX-10.N 8 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS EXHIHIT 10(n) OLIN CORPORATION 1997 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS As Amended and Restated Effective February 8, 1999 1. Purpose. The purpose of the Olin Corporation 1997 Stock Plan for Non- employee Directors the ("Plan") is to promote the long-term growth and financial success of Olin Corporation 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. The Plan is amended and restated to reflect the distribution to Olin's shareholders of all of the outstanding shares of common stock of Arch Chemicals, Inc., effective as of the date of such distribution. 2. Definitions. The following capitalized terms utilized herein have the following meanings: "Annual Grant Participant" means a Non-employee Director who is not eligible for any other pension benefits from the Company, including, but not limited to, benefits from the Olin Employees Pension Plan, the Olin Senior Executive Pension Plan or another pension plan of the Company. "Arch" means Arch Chemicals, Inc., a Virginia corporation and any successor. "Arch Common Stock" means shares of common stock of Arch, par value $1.00 per share. "Arch Director" means a non-employee director of the board of directors of Arch. "Arch Stock Account" means the Stock Account to which phantom shares of Arch Common Stock are credited. "Arch Directors' Plan" means the Arch Chemicals, Inc. 1999 Stock Plan for Non-employee Directors. "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 by at least 1,000 shareholders; (ii) a person, partnership, joint venture, corporation or other entity, or two or more of any of the 2 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; and (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. "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, $1.00 par value per share. "Company" means Olin Corporation, a Virginia corporation, and any successor. "Credit Date" means the first day of each calendar quarter, beginning with January 1, 1998. "Distribution" means the distribution of all outstanding shares of Arch Common Stock to the shareholders of the Company. "Distribution Date" means the dividend payment date fixed by the Board for the Distribution. "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 $25,000, if any; provided that in the event the annual cash retainer is prorated to reflect that such Non-employee Director did not serve as such for the full calendar year, the $25,000 shall be similarly prorated. "Fair Market Value" means, with respect to a date, on a per share basis, with respect to phantom shares of Common Stock or Arch Common Stock, the average of the high and the low price of a share of Common Stock or Arch Common Stock, as the case may be, as reported on the consolidated tape of the 3 New York Stock Exchange on such date or if the New York Stock 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. "l934 Act" means the Securities Exchange Act of 1934, as amended from time to time. "1994 Plan" means the 1994 Stock Plan for Non-employee Directors as in effect on October 1, 1997. "Non-employee Director" means a member of the Board who is not an employee of the Company or any subsidiary thereof. "Olin Stock Account" means the Stock Account to which phantom shares of Common Stock are credited from time to time. "One-time Grant Participant" means a Director with an accrued benefit under the Retirement Plan, as shown on Exhibit 1 hereto; provided such Director waives his or her rights with respect to the Retirement Plan. (See Exhibit 1 for the present value of each such Director's accrued benefit as of December 31, 1996.) "Plan" means this Olin Corporation 1997 Stock Plan for Non-employee Directors as amended from time to time. "Prior Plans" means the 1994 Plan and all of the Corporation's other directors' compensation plans, programs, or arrangements which provided for a deferred cash or stock account. "Retirement Date" means the date the Non-employee Director ceases to be a member of the Board for any reason; provided that a Non-employee Director will not be considered to have incurred a Retirement Date if he ceases to be a Non-employee Director to become an Arch Director. "Retirement Plan" means the Retirement Plan for Non-employee Directors of Olin Corporation as in effect on December 31, 1996. "Stock Account" means an account established under the Plan for a Non- employee Director to which shares of Common Stock and Arch Common Stock have been or are to be credited in the form of phantom stock, which shall include the Olin Stock Account and the Arch Stock Account. 4 3. Term. The Plan became effective January 1, 1997. Once effective, the Plan shall operate and shall remain in effect until terminated by action of the Board as provided in Section 9 hereof. The Plan was amended and restated effective October 2, 1997, and again effective as of the Distribution Date. 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. 6. Grants and Deferrals. (a) Annual Stock Grant. Subject to the terms and conditions of the ------------------ Plan, each Non-employee Director shall be credited with 204 shares of Common Stock on January 1 of each calendar year beginning in 1998 and each Annual Grant Participant shall be credited with 500 shares of Common Stock on January 1 of each calendar year beginning in 1997. To be entitled to such credit in any calendar year, a Non-employee Director or an Annual Grant Participant, as the case may be, must be serving as such on January 1 of such year; provided, however, that in the event a person becomes an Annual Grant Participant subsequent to January 1 of a calendar year, such Annual Grant Participant, on the first day of the calendar month following his or her becoming such, shall be credited with that number of shares (rounded up to the next whole share in the event of a fractional share) of Common Stock equal to one-twelfth of 500 times the number of whole calendar months remaining in such calendar year following the date he or she becomes an Annual Grant Participant. Actual receipt of shares shall be deferred and each eligible Non-employee Director or Annual Grant Participant, as the case may be, shall receive a credit to his or her Olin Stock Account in the amount of such shares and on the date of such credit. A Non- employee Director may elect in accordance with Section 6(f) to defer to his or her Olin Stock Account receipt of all or any portion of such shares to a date or dates on or following such Non-employee Director's or Annual Grant Participant's Retirement Date. Except with respect to any shares the director has so elected to defer, 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(i)) as soon as practicable following his or her Retirement Date. (b) Annual Retainer Stock Grant. Subject to the terms and conditions --------------------------- of the Plan, on each January 1 of each year beginning with 1998, each Non- employee Director who is such on such date shall receive that number of shares (rounded up to the next whole share) of Common Stock having an aggregate Fair Market Value on such date of $25,000. In the event a person becomes in a calendar year a Non-employee Director subsequent to January 1 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 5 of a fractional share) of Common Stock having an aggregate Fair Market Value on such first day of an amount equal to $2,084 times the number of whole calendar months remaining in such calendar year following the date he or she becomes a 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. A Non-employee Director may elect to defer receipt of all or any portion of such shares in accordance with Section 6(f). Except with respect to any shares the director has so elected to defer, 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) One-time Stock Grant. Subject to the terms and conditions of the -------------------- Plan, each One-time Grant Participant shall be credited as of January 15, 1997, with that number of shares (rounded up to the next whole share in the event of a fractional share) of Common Stock equal to the present value of his or her accrued benefit under the Retirement Plan, divided by the Fair Market Value per share on January 15, 1997. Actual receipt of all shares credited under this Section 6(c) shall be deferred and each One-time Grant Participant shall receive a credit to his or her Olin Stock Account in the amount of such credit on January 15, 1997. A One-time Grant Participant may elect in accordance with Section 6(f) to defer receipt of all or any portion of such shares to a date or dates following such One-time Grant Participant's Retirement Date. Except with respect to any shares so deferred, certificates representing such shares shall be delivered to the One-time Grant Participant (or in the event of death, to his or her beneficiary designated pursuant to Section 6(i)) as soon as practicable following his or her Retirement Date. (d) Election to Receive Meeting Fees and Excess Retainer in Stock in ---------------------------------------------------------------- Lieu of Cash. Subject to the terms and conditions of the Plan, 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 service 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(f). 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). The number of shares (rounded up to the next whole share in the event of a fractional share) for a calendar quarter payable to a Non-employee Director who so elects to receive meeting fees in the form of shares shall be equal to the aggregate Fair Market Value 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 6 in shares. Except with respect to any shares the director has elected to defer, 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. (e) Deferral of Meeting Fees and Excess Retainer. Subject to the -------------------------------------------- terms and conditions of the Plan, a Non-employee Director may elect to defer all or a portion of the shares payable under Section 6(d) 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. 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(f). 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. (f) Elections. --------- (1) Deferrals. All elections under Sections 6(a), 6(b), 6(c), 6(d), 6(e), 6(f)(2) and 6(f)(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). All One-time Grant Participant elections shall be made before December 31 of the year prior to the year in which the shares of Common Stock are to be granted (or, in the case of an individual who becomes an Annual Grant Participant during a calendar year, before the last day of the calendar month of his or her becoming such). Deferral elections shall also (A) specify the portions (in 25% increments) to be deferred and (B) specify the future date or dates on which deferred amounts are to be paid, or the future event or events upon the occurrence of which the deferred amounts are to be paid, and the method of payment (lump sum or annual installments (up to 10)). However, Non-employee Directors 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(d) 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 7 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) Olin 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 elected to defer shares under Sections 6(b) or 6(e) shall receive a credit to his or her Olin 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(f)(4). (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 elected to defer cash fees and/or the Excess Retainer under Section 6(e) in the form of cash shall receive a credit to his or her Cash Account. The amount of the credit shall be the dollar amount of such Director's meeting fees earned during the immediately preceding quarterly period or the amount of the Excess Retainer to be paid for the calendar year, as the case may be, and in each case, specified for deferral in cash. A Non-employee Director may elect to defer interest paid on his or her Cash Account in accordance with Section 6(f)(4). (4) Dividends and Interest. Each time a cash dividend is paid on Common Stock or Arch Common Stock, a Non-employee Director who has shares of such stock 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 Olin Stock Account or Arch Stock Account, as the case may be, on the record date for such dividend times the dividend paid per applicable share unless the director has elected to defer such dividend to his or her applicable Stock Account as provided herein. If the Non-employee Director has elected to defer such dividend, he or she shall receive a credit for such dividends on the dividend payment date to his or her Olin Stock Account or Arch 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) 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 of Common Stock or Arch Common Stock, as the case may be, on the dividend payment date. 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 8 of the preceding quarter, payable at a rate equal to the Interest Rate in effect for such preceding quarter unless 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 Arch Stock Account will be paid out in cash and Olin Stock Accounts shall be paid out in shares of Common Stock unless the Non-employee Director elects at the time the payment is due to take the Olin Stock Account in cash. Cash amounts and certificates representing shares credited to the Olin Stock Account shall be delivered to the Non-employee Director as soon as practicable following the termination of the deferral and consistent therewith. (g) No Stock Rights. Except as expressly provided herein, the --------------- deferral of shares of Common Stock or Arch Common Stock into a Stock Account shall confer no rights upon such Non-employee Director, as a shareholder of the Company or of Arch 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. (h) Change in Control. Notwithstanding anything to the contrary in ----------------- this Plan or any election, in the event a Change in Control occurs, 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 the Olin 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 Stock Account shall be determined by multiplying the number of shares held in the Olin Stock Account or Arch Stock Account by the higher of (i) the highest Fair Market Value of Common Stock or Arch Common Stock, as appropriate, 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 or Arch Common Stock, as appropriate, pursuant thereto. (i) 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. (j) Prior Plan Accounts. As of October 2, 1997, a Participant or any ------------------- former Non-employee Director who had an existing account under any Prior Plan shall automatically have such account transferred, in the case of an account denominated in cash, to the Cash Account, and in the case of an account denominated in Olin Common Stock, to the Olin Stock Account, to be maintained and administered pursuant to the terms and conditions of this Plan; provided that prior annual 100- or 204-share grant 9 deferrals shall be treated as deferrals of 204-share grants under this Plan, the $25,000 annual share grant under the 1994 Plan shall be treated as deferrals under Paragraph 6(b) hereof and deferrals of meeting fees under all Prior Plans and of the Excess Retainer under the 1994 Plan shall be treated as deferrals under Paragraph 6(d) hereof. Prior elections and beneficiary designations under the 1994 Plan and this Plan shall govern this Plan unless changed subsequent to October 2, 1997. (k) Adjustment for Distribution. Immediately prior to the --------------------------- Distribution, the terms of the phantom shares of Common Stock held in the Olin Stock Account of each Non-Employee Director who will become an Arch Director shall be amended to provide that such shares shall be paid out in cash based on the Fair Market Value of such shares at the time of distribution to the Arch Director. As of the Distribution Date, the Arch Stock Account of each Non- Employee Director on such date shall be credited with the number of shares of Arch Common Stock that the Non-Employee Director would have received in the Distribution Date had the Non-Employee Director owned directly the number of shares of Common Stock held in his or her Olin Stock Account. As of the Distribution Date, the Cash Account and Stock Account of each Arch Director (after giving effect to the adjustment described in this Section 6(k)) shall be transferred to the Arch Directors' Plan provided that the Arch Director provides the Company with a release, acceptable to the Committee, waiving all rights to benefits under this Plan. With respect to a Non-Employee Director who does not become an Arch Director, shares credited to his or her Arch Stock Account shall be treated as follows: (i) to the extent such shares represent a dividend on shares of Common Stock credited pursuant to paragraph 6(a) of the 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 Common Sock credited pursuant to paragraph 6(b) of the Plan (or shares arising from dividend equivalents thereon), such shares shall be deemed credited pursuant to paragraph 6(b) of the Plan, and (iii) to the extent such shares represent a dividend on shares of Common Stock credited under paragraph 6(c) of the Plan (or shares arising from dividend equivalents thereon), such shares shall be deemed credited pursuant to paragraph 6(c) of the Plan. (l) Stock Account Transfers. A Non-Employee Director may elect from ----------------------- time to time to transfer all or a portion (in 25% increments) of his or her Arch Stock Account to his or her Olin Stock Account. The amount of phantom shares of Common Stock to be credited to a Non-Employee Director's Olin Stock Account shall be equal to the number of shares of Common Stock that could be purchased if the number of phantom shares of Arch Common Stock in his or her Arch Stock Account being transferred were sold and the proceeds reinvested in Common Stock based on the Fair Market Value of each. Except as provided in Section 6(f)(4) with respect to dividends or in Section 8, no additional contributions or additions may be made to a Non-Employee Director's Arch Stock Account after the Distribution Date. 10 7. Limitations and Conditions. (a) Total Number of Shares. The total number of shares of Common ---------------------- Stock that may be issued to Non-employee Directors under the Plan is 150,000. Such total number of shares may consist, in whole or in part, of authorized but unissued shares. The foregoing number may be increased or decreased by the events set forth in Section 8 below. No fractional shares shall be issued hereunder. In the event a Non-employee Director is entitled to a fractional share, such share amount shall be rounded upward to the next whole share amount. (b) No Additional Rights. Nothing contained herein shall be deemed -------------------- to create a right in any Non-employee Director to remain a member of the Board, to be nominated for reelection or to be reelected as such or, after ceasing to be such a member, to receive any cash or shares of Common Stock under the Plan which are not already credited to his or her accounts. 8. Stock Adjustments. In the event of any merger, consolidation, stock or other non-cash dividend, extraordinary cash dividend, split-up, spin-off, combination or exchange of shares or recapitalization or change in capitalization, or any other similar corporate event, the Committee may make such adjustments in (i) the aggregate number of shares of Common Stock that may be issued under the Plan as set forth in Section 7(a) and the number of shares 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 and (iii) the amount and type of payment that may be made in respect of unpaid dividends on shares of Arch Common Stock or Common Stock whose receipt has been deferred pursuant to Section 6(f), 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(i) 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. 11 12. Rule 16b-3 Compliance. It is the intention of the Company that all transactions under the Plan be exempt from liability imposed by Section 16(b) of the 1934 Act. Therefore, if any transaction under the Plan is found not to be in compliance with an exemption from such Section 16(b), the provision of the Plan governing such transaction shall be deemed amended so that the transaction does so comply and is so exempt, to the extent permitted by law and deemed advisable by the Committee, and in all events the Plan shall be construed in favor of its meeting the requirements of an exemption. 12 Exhibit 1 Accrued Benefits Under the Retirement Plan ------------------------------------------ for Non-Employee Directors of Olin Corporation ----------------------------------------------
=========================================================================================== Present Value of Accrued Benefit as of Non-employee Director December 31, 1996 ------------------------------------------------------------------------------------------- Richard E. Cavanagh $74,000 ------------------------------------------------------------------------------------------- William W. Higgins $144,000 ------------------------------------------------------------------------------------------- Suzanne Denbo Jaffe $90,000 ------------------------------------------------------------------------------------------- Jack D. Kuehler $181,000 ------------------------------------------------------------------------------------------- H. William Lichtenberger $144,000 ------------------------------------------------------------------------------------------- G. Jackson Ratcliffe $138,000 ------------------------------------------------------------------------------------------- William L. Read $253,000 ------------------------------------------------------------------------------------------- John P. Schaefer $155,000 ===========================================================================================
EX-10.S 9 SUPP. & DEFERRAL BENEFIT PENSION PLAN EXHIBIT 10(s) OLIN SUPPLEMENTARY AND DEFERRAL BENEFIT PENSION PLAN (Restated as of September 1, 1995) Article I. The Plan -------------------- 1.1 Establishment of Plan. Olin Corporation (the "Company") hereby ---------------------- restates into a single document its Supplementary Pension Plan and Deferral Benefit Pension Plan for the benefit of salaried employees of Olin Corporation and other Employing Companies who may be eligible to participate in the Plan. The restated Plan is effective as of September 1, 1995 and is known as the "Olin Supplementary and Deferral Benefit Pension Plan." 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 qualified defined benefit plans maintained by the Company or other Employing Companies (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 the Company 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 (i) 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 provides for benefits in excess of the Code Section 415 limits and, therefore, is intended to 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 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 eligible to receive a Supplemental Pension Benefit as provided in this Plan. 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 (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 the 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 Retirement 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). Article IV. Payment of Benefits. --------------------------------- 4.1. Benefits commencing on or after Reaching Early Retirement Date. --------------------------------------------------------------- (a) A Participant may retire from active service with 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 Olin Corporation Employees' Pension Plan. In the case of Participants who transfer directly to Primex or Arco Chemical Company ("Arco") (or who, in the case of Primex only, transfer directly to Primex within five (5) years of the spin-off of Primex), (i) "actual retirement" shall be construed to mean retirement or termination of service from Primex or Arco and their affiliates, as the case may be, and (ii) service with Primex or Arco (and their affiliates) shall be credited in enabling the Participant to attain his early retirement age under this 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 Olin Corporation Employees' Pension Plan) and who is at least age fifty-two (52) and 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 active Employee until age fifty-five (55). 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 Olin non-qualified and qualified pension plans using, in the case of the qualified pension 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 Olin 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 pension 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 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 Olin Qualified Plan, and further provided that, in the case of Participants who transfer directly to Primex or Arco, service with those respective companies and their affiliates shall be counted in enabling such Participants to retire on or after attaining age fifty-five (55) and actually retiring from Primex or Arco, as the case may be, in accordance with Section 4.1 above. 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 Benefits (with, if applicable, the consent of his surviving Spouse), that same form of payment shall apply to payment of his Supplementary 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 Supplementary 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. If a Participant elects to receive Accelerated Benefits, then the Actuarial Present Value of such Benefits shall be paid, at the election of the Chairman of the Board of Directors of the Company, either in a single sum or in up to three (3) annual installments (such single sum or annual installments being referred to in this Plan as "Accelerated Benefits"). The Participant's Accelerated Benefits shall commence on his Accelerated Benefit Commencement Date, which shall be twelve full months following a Participant's actual retirement date at age fifty-five (55) or later (the "participant's "Accelerated Benefit Commencement Date"). For purposes of determining whether a Participant has reached his fifty-fifth (55th) birthday and, thus, is eligible to commence benefits under Section 4.1(a) instead of on a deferred vested basis under Section 4.2, Section 4.1(b) shall apply. In the case of Participants who transfer directly to Primex or Arco (or who, in the case of Primex only, transfer directly to Primex within five (5) years of the spin-off of Primex), actual retirement shall be construed to mean retirement or termination of service from Primex or Arco and their affiliates, as the case may be. (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 Chairman of the Board of Directors of the Company, and in the case of the Chairman, the Selection Committee, either in a single sum, in up to three (3) annual installments, or in a combination of annuity payments and either a single sum or annual installments, provided, however, that no monthly benefits shall be paid to Participants who transfer to Primex or Arco until they separate from Primex or Arco, respectively. (c) In lieu of funding an employee-grantor trust or receiving Accelerated Benefits, the Participant may elect, at least one full year prior to such Accelerated Benefit Commencement Date, to receive benefit payments in an annuity for life in accordance with Section 4.1 of this Plan. 4.5 Assumptions used for Determining Amount to be contributed to Employee- --------------------------------------------------------------------- grantor Trust; Threshold for Accelerated Benefits. -------------------------------------------------- (a) Actuarial Assumptions for Employee-Grantor Trust. In determining the ------------------------------------------------ Actuarial Present Value of the Participant's Plan benefit to be used for purposes of funding an employee-grantor trust, the benefit shall be determined (i) as of the close of the Plan Year (i.e., December 31) prior to the year in which the employee grantor trust is being funded; (ii) using the Code Section 415 limits and 401(a)(17) limits then currently in effect as of the date on which the actuarial present value is being determined or may, in the discretion of the Plan Administrator, be projected, using 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. (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 Olin 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 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 (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. ----------------------------------------- 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" shall be deemed to have occurred if (i) Olin ceases to be a publicly owned corporation with at least 1000 stockholders; or (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 Sections 13(d)(3) and 14(d)(2) 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 Olin, becomes 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 Board of Directors of the Company (together with any new Director whose election by the 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) the Company's Board of Directors determines that a tender offer for the Company's shares indicates a serious intention by the offeror to acquire control 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 an Employing Company for payment of benefits hereunder. No Participant, surviving Spouse or any other Beneficiary shall have any interest in any particular assets of an Employing Company by reason of the right to receive a benefit under this Plan and shall have the rights only of a general unsecured creditor of Employing Company with respect to any rights under the Plan. 5.2 Liability for Payment. Each Employing Company shall pay the benefits --------------------- provided under this Plan with respect to Participants who are employed, or were formerly employed by it during their participation in the Plan. In the case of a Participant who was employed by more than one Employing Company, the Committee shall allocate the cost of such benefits among such Employing Companies in such manner as it deems equitable. The obligations of the Employing Company shall not be funded in any manner. 5.3 Anti-alienation. No Participant or Beneficiary shall have the right --------------- to assign, transfer, encumber or otherwise subject to any lien any payment or any other interest under this Plan, nor shall such payment or interest be subject to attachment, execution or levy of any kind. Article VI. Plan Administration ------------------------------- 6.1 Plan Administrator. The Company hereby appoints the 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; (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 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 or any duly authorized committee or officer. Any Employing Company may withdraw from participation in the Plan at any time. No amendment or termination of the Plan or withdrawal therefrom by an Employing Company shall adversely affect the vested benefits payable hereunder to any Participant for service rendered prior to the effective date of such amendment, termination or withdrawal. Article VIII. Miscellaneous ---------------------------- 8.1 Gender and Number. Whenever any words are used herein in the ----------------- masculine, feminine or neuter gender, they shall be construed as though they were also used in another gender in all cases where such would apply, and whenever any words are used herein in the singular or plural form, they shall be construed as though they were also used in another form in all cases where they would so apply. 8.2 Action by the Company. Whenever the Company under the terms of this --------------------- Plan is permitted or required to do or perform any act or thing, it shall be done and performed by an officer or committee duly authorized by the Board of Directors of the Company. 8.3 Headings. The headings and subheadings of this Plan have been --------- inserted for convenience of reference only and shall not be used in the construction of any of the provisions hereof. 8.4 Uniformity and Non Discrimination. All provisions of this Plan shall ---------------------------------- be interpreted and applied in a uniform nondiscriminatory manner. 8.5 Governing Law. To the extent that state law has not been preempted by -------------- the provisions of ERISA or any other laws of the United States heretofore or hereafter enacted, this Plan shall be construed under the laws of the State of Connecticut. 8.6 Employment Rights. Nothing in this Plan shall confer any right upon ------------------ any Employee to be retained in the service of the Company or any of its affiliates. 8.7 Incompetency. In the event that the Plan Administrator determines ------------- that a Participant is unable to care for his affairs because of illness or accident or any other reason, any amounts payable under this Plan may, unless claim shall have been made therefor by a duly appointed guardian, conservator, committee or other legal representative, be paid by the Plan Administrator to the spouse, child, parent or other blood relative or to any other person deemed by the Plan Administrator to have incurred expenses for such Participant, and such payment so made shall be a complete discharge of the liabilities of the Plan therefor. Dated: OLIN CORPORATION By ____________________________ Its EX-10.V 10 EMPLOYEE BENEFITS ALLOCATION AGREEMENT EXHIBIT 10(v) ================================================================================ FORM OF EMPLOYEE BENEFITS ALLOCATION AGREEMENT BETWEEN OLIN CORPORATION AND ARCH CHEMICALS, INC. ================================================================================ TABLE OF CONTENTS ARTICLE I Definitions ----------- Section 1.1. General.............................................. 1 ARTICLE II U.S. Plans and Stock Plans -------------------------- Section 2.1. Qualified Retirement Plan............................ 8 Section 2.2. Supplemental Retirement Plans and Employment Agreements................................ 11 Section 2.3. Qualified Defined Contribution Plan.................. 12 Section 2.4. Welfare Plans........................................ 13 Section 2.5. Options.............................................. 16 Section 2.6. Executive and Director Compensation Plans.............................................. 18 ARTICLE III Foreign Plans ------------- Section 3.1. General Principles................................... 20 Section 3.2. Exceptions to General Principles..................... 21 ARTICLE IV General Provisions ------------------ Section 4.1. Employment Transfers; Severance Pay.................. 21 Section 4.2. Recognition of Olin Employment Service, Etc......................................... 21 Section 4.3. Workers' Compensation................................ 22 ARTICLE V Miscellaneous ------------- Section 5.1. Guarantee of Subsidiaries' Obligations.......................................... 22 Section 5.2. Disputes............................................. 22 Section 5.3. Sharing of Information............................... 23 Section 5.4. Termination.......................................... 23 Section 5.5. Rights to Amend or Terminate Plans; No Third Party Beneficiaries......................... 23 Section 5.6. Complete Agreement................................... 24 Section 5.7. Governing Law........................................ 24 Section 5.8. Notices.............................................. 24 Section 5.9. Amendment and Modification........................... 24 Section 5.10. Successors and Assigns............................... 24 Section 5.11. Consent to Jurisdiction.............................. 24 Section 5.12. Counterparts......................................... 25 Section 5.13. Interpretation....................................... 25 Section 5.14. Legal Enforceability................................. 25 Section 5.15. References, Construction............................. 25 EMPLOYEE BENEFITS ALLOCATION AGREEMENT, dated as of February 8, 1999, by and between Olin Corporation, a Virginia corporation ("Olin"), and Arch Chemicals, Inc., a Virginia corporation ("Arch"). W I T N E S S E T H: WHEREAS Olin and Arch have entered into that certain Distribution Agreement dated as of the date hereof, between Olin and Arch (the "Distribution Agreement"), providing for the distribution to the holders of the issued and outstanding shares of common stock, par value $1.00 per share, of Olin ("Olin Common Stock") all of the issued and outstanding shares of common stock, par value $1.00 per share, of Arch ("Arch Common Stock"); WHEREAS the Distribution is intended to qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS the Distribution Agreement, among other things, sets forth the principal corporate transactions required to effect the Distribution and sets forth other agreements that will govern certain other matters prior to and following the Distribution; and WHEREAS in connection with the Distribution and pursuant to the Distribution Agreement, Olin and Arch desire to provide for the allocation of assets and Liabilities and other matters relating to employee benefit plans and compensation arrangements. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I Definitions ----------- Section 1.1. General. Any capitalized terms that are used in this -------- Agreement but not defined herein (other than the names of Olin employee benefit plans) shall have the meanings set forth in the Distribution Agreement, and, as used herein, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Agreement": this Employee Benefits Allocation Agreement. --------- "Alternate Payee": an alternate payee under a domestic relations --------------- order which has been determined by the appropriate Plan administrator to be qualified under Section 414(p) of the Code and Section 206(d) of ERISA and which creates or recognizes an alternate payee's right to, or assigns to an alternate payee, all or a portion of the benefits payable to a participant under any Plan, or an alternate recipient under a medical child support order which has been determined by the appropriate Plan administrator to be qualified under Section 609(a) of ERISA and which creates or recognizes the existence of an alternate recipient's right to, or assigns to an alternate recipient the right to, receive benefits for which a participant or beneficiary is eligible under any Plan. "Arch": defined in the preamble. ---- "Arch Common Stock": defined in the recitals. ----------------- "Arch Employee": any individual who is, as of the Distribution Date, ------------- identified on the records of Arch as being, an Employee of any member of the Arch Group (including an individual who is receiving long-term disability benefits on the Distribution Date and whose most recent active employment was with any member of the Pre-Distribution Group in the Arch Business). If such an individual has received notice of layoff or termination from Olin or any of its Affiliates prior to the Distribution Date, he or she shall not be considered to be an Arch Employee on the Distribution Date if he or she is listed on Schedule A hereto. Individuals who are leased to Arch by Olin as of the Distribution Date are not considered Arch Employees. 3 "Arch Foreign Plan": a Foreign Plan provided by, contributed to or ----------------- sponsored by one or more members of the Arch Group. "Arch Former Employee": any individual who is, as of the Distribution -------------------- Date, identified on the records of Olin as being an Arch Former Employee, which identification shall have been made based upon a good faith determination by Olin and Arch that (i) such individual was, at any time before the Distribution Date, an employee of any member of the Pre-Distribution Group, (ii) such individual is not an Olin Employee or an Arch Employee, and (iii) such individual's most recent active employment was with any such member of the Arch Business; provided that, if at any time on or before December 31, 1999, Arch and -------- Olin determine that any one or more individuals were identified as Arch Former Employees in error and should have been identified as Olin Former Employees and agree to correct such error, such individuals shall be considered Olin Former Employees and Arch and Olin shall use their reasonable best efforts to implement the terms of this Agreement as they apply to such individuals as if such individuals had been correctly identified as of the Distribution Date. "Arch Group": Arch and its Subsidiaries after the Distribution. ---------- "Arch Option": an option to purchase from Arch shares of Arch Common ----------- Stock provided to an Arch Participant or an Olin Participant pursuant to Section 2.5. "Arch Participant": any individual who is an Arch Employee, an Arch ---------------- Former Employee, or a Beneficiary of such an individual. "Arch Ratio": the amount obtained by dividing (i) the opening price ---------- on the first day of regular way trading of the Arch Common Stock on the NYSE Composite Tape, as reported in The Wall Street Journal, by (ii) the closing price on the last day of trading of Olin Common Stock with due bills on the NYSE Composite Tape, as reported in The Wall Street Journal. "Arch Restricted Stock Units": units representing shares of Arch --------------------------- Common Stock granted pursuant to an Arch Plan. 4 "Arch SAR": a stock appreciation right granted with respect to Arch -------- Common Stock in accordance with Section 2.5. "Arch SIP": the Qualified Plan established by Arch pursuant to -------- Section 2.3(a). "Arch U.S. Welfare Plan": an Arch Welfare Plan that is a U.S. Plan. ---------------------- "Arch Welfare Plan": a Welfare Plan sponsored by one or more members ----------------- of the Arch Group. "Assigned Split Dollar Policies": defined in Section 2.4(c). ------------------------------ "Beneficiary": a beneficiary, dependent or Alternate Payee or estate ----------- of a participant in a Plan, in each case in his, her or its capacity as such a beneficiary, dependent, Alternate Payee or estate. "Code": defined in the recitals. ---- "Deferred Compensation Plan": a Plan, other than a Qualified Plan or -------------------------- a Supplemental Retirement Plan, providing deferred compensation. "Distribution Agreement": defined in the recitals. ---------------------- "Distribution Ratio": the ratio of one share of Arch Common Stock to ------------------ two shares of Olin Common Stock. "Employee": with respect to any entity, an individual who is -------- considered, according to the payroll and other records of such entity, to be employed by such entity, regardless of whether such individual is, at the relevant time, actively at work or on leave of absence (including vacation, holiday, sick leave, family and medical leave, disability leave, military leave, jury duty, and any other leave of absence or similar interruption of active employment that is not considered, according to the policies or practices of such entity, to have resulted in a permanent termination of such individual's employment). "Enrolled Actuary": with respect to all U.S. Plans, The Segal ---------------- Company, and, with respect to all Foreign Plans, an enrolled actuary or other party making actuarial 5 or similar determinations pursuant to this Agreement with respect to assets or Liabilities relating to a particular employee benefit plan selected by Olin with the approval of Arch, which approval shall not be unreasonably withheld. "ERISA": the Employee Retirement Income Security Act of 1974, as ----- amended, or any successor legislation, and the regulations promulgated thereunder. "Foreign Plan": any Plan maintained outside of the United States ------------ primarily for the benefit of individuals substantially all of whom are nonresident aliens with respect to the United States. "New Olin Option": defined in Section 2.5(b). --------------- "Olin": defined in the preamble. ---- "Olin CEOP": the Olin Corporation Contributing Employee Ownership --------- Plan. "Olin CEOP Trust": the trust established to fund the Olin CEOP. --------------- "Olin Common Stock": defined in the recitals. ----------------- "Olin Employee": any individual who is, as of the Distribution Date, ------------- identified on the records of Olin as being an Employee of any member of the Olin Group (excluding an individual who is receiving long-term disability benefits on the Distribution Date and whose most recent active employment was with any member of the Pre-Distribution Group in the Arch Business); provided, however, -------- ------- that an Employee of Olin or its Affiliates on the Distribution Date who becomes a Subsequent Arch Employee shall not be considered an Olin Employee once he or she becomes a Subsequent Arch Employee. "Olin Foreign Plan": a Foreign Plan provided by, contributed to or ----------------- sponsored by one or more members of the Olin Group. "Olin Former Employee": any individual who was, at any time before -------------------- the Distribution Date, an Employee of any member of the Pre-Distribution Group, and who is not an Olin Employee, an Arch Employee or an Arch Former Employee; provided that, if at any time on or before December 31, 1999, Arch and Olin determine that any one or more 6 individuals were identified as Olin Former Employees in error and should have been identified as Arch Former Employees, and agree to correct such error, such individuals shall be considered Arch Former Employees, and Arch and Olin shall use their reasonable best efforts to implement the terms of this Agreement as they apply to such individuals as if such individuals had been correctly identified as of the Distribution Date. "Olin Group": Olin and its Subsidiaries after the Distribution. ---------- "Olin Incentive Plans": collectively, the 1980 Stock Option Plan for -------------------- Key Employees of Olin Corporation and Subsidiaries (the "1980 Olin Stock Option Plan"); the 1988 Stock Option Plan for Key Employees of Olin Corporation and Subsidiaries (the "1988 Olin Stock Option Plan"); the 1996 Stock Option Plan for Key Employees of Olin Corporation and Subsidiaries (the "1996 Olin Stock Option Plan"); and the Olin 1991 Long-Term Incentive Plan, each as in effect on the Distribution Date. "Olin Option": an option to purchase shares of Olin Common Stock ----------- granted pursuant to any of the Olin Incentive Plans. "Olin Participant": any individual who is an Olin Employee, an Olin ---------------- Former Employee, or a Beneficiary of such an individual. "Olin Pension Plan": the Olin Corporation Employees Pension Plan. ----------------- "Olin Ratio": the amount obtained by dividing (i) the opening price ---------- of Olin Common Stock on the first day of trading ex-dividend (the trading day after due bill trading ends) on the NYSE Composite Tape, as reported in The Wall Street Journal, by (ii) the closing price on the last day of trading of Olin Common Stock with due bills on the NYSE Composite Tape, as reported in The Wall Street Journal. "Olin Restricted Stock Units": units representing restricted shares --------------------------- of Olin Common Stock granted pursuant to, and subject to forfeiture under, any of the Olin Incentive Plans. "Olin Supplemental Plans": collectively, the Olin Corporation Senior ----------------------- Executive Benefit Plan, the Olin 7 Supplementary Pension Plan, Olin Deferral Benefit Pension Plan and the Olin Supplemental Contributory Employee Ownership Plan, each as in effect on the Distribution Date. "Olin U.S. Welfare Plan": any Olin Welfare Plan that is a U.S. Plan. ---------------------- "Olin Welfare Plan": any Welfare Plan of one or more members of the ----------------- Olin Group. "Plan": any written or unwritten plan, policy, program, payroll ---- practice, ongoing arrangement, trust, fund, contract, insurance policy or other agreement or funding vehicle provided by, contributed to or sponsored by one or more members of the Olin Group or the Arch Group, providing benefits to Olin Participants or Arch Participants, regardless of whether it is mandated under local law or negotiated or agreed to as a term or condition of employment or otherwise, and regardless of whether it is governmental, private, funded, unfunded, financed by the purchase of insurance, contributory or noncontributory. "Pre-Adjustment Option": defined in Section 2.5(b). --------------------- "Pre-Distribution Group": the Olin Group and the Arch Group together, ---------------------- as in effect immediately prior to the Distribution Date. "Qualified Plan": a Plan that is an "employee pension benefit plan" -------------- as defined in Section 3(2) of ERISA that constitutes, or is intended in good faith to constitute, a qualified plan under Section 401(a) of the Code. "Retained Arch Inactive Participant": any Arch Former Employee who is ---------------------------------- a retired or terminated vested participant in the Olin Pension Plan whose termination under the Olin Pension Plan occurred prior to the Distribution Date, or a Beneficiary of any such Arch Former Employee. "Subsequent Arch Employee": any individual who is identified as an ------------------------ Olin Employee as of the Distribution Date but who becomes an Employee of any member of the Arch Group after the Distribution Date but on or prior to February 8, 2000. An individual ceases to be an Olin Employee when he or she becomes a Subsequent Arch Employee. 8 "Subsequent Olin Employee": any individual who is identified as an ------------------------ Arch Employee as of the Distribution Date but who becomes an Employee of any member of the Olin Group after the Distribution Date but on or prior to February 8, 2000. An individual ceases to be an Arch Employee when he or she becomes a Subsequent Olin Employee. "Successor Plan": defined in Section 2.1(a). -------------- "Supplemental Employment Agreement": any written enforceable --------------------------------- agreement (other than Tier I Executive Agreements and Tier II Change in Control Agreements) between any member of the Pre-Distribution Group and any single Olin Employee, Olin Former Employee, Arch Employee or Arch Former Employee providing for post-retirement income, pension or welfare benefits (other than pursuant to a Welfare Plan, a Qualified Plan or a Supplemental Retirement Plan). "Supplemental Retirement Plan": a U.S. Plan that is (i) an "employee ---------------------------- pension benefit plan" within the meaning of Section 3(2) or ERISA but is not a Qualified Plan, or (ii) an excess benefit plan under ERISA, including the Olin Supplementary Pension Plan, Olin Corporation Senior Executive Benefit Plan and the Olin Supplemental Contributing Employee Ownership Plan. "U.S. Plan": any Plan that is not a Foreign Plan. --------- "Welfare Plan": any Foreign Plan or U.S. Plan that is an "employee ------------ welfare benefit plan" as defined in Section 3(l) of ERISA (whether or not such plan is subject to ERISA). ARTICLE II U.S. Plans and Stock Plans -------------------------- Section 2.1. Qualified Retirement Plan. Olin and Arch shall take all -------------------------- steps necessary or appropriate so that the provisions of this Section 2.1 are implemented in a timely fashion, as more fully set forth below. (a) Establishment of Successor Plan. On or prior to the Distribution -------------------------------- Date, Arch shall establish a defined benefit pension plan that is a Qualified Plan (the "Successor Plan") that contains terms substantially similar to the terms in the Olin Pension Plan for the benefit of Arch Employees and Subsequent Arch Employees. Arch agrees 9 that each Arch Employee or Subsequent Arch Employee shall (i) immediately become eligible to participate in the Successor Plan as of the Distribution Date (or in the case of a Subsequent Arch Employee, as of the date of transfer) and (ii) for all purposes (other than eligibility) under the Successor Plan, be entitled to service, compensation and the accrued benefit credited to such Arch Employee as of the Distribution Date (or in the case of a Subsequent Arch Employee, as of the date of transfer) under the terms of the Olin Pension Plan as if such service had been rendered to Arch, as if such compensation had been paid by Arch and as if such accrued benefit had originally been credited to such Arch Employee or Subsequent Arch Employee under the Successor Plan. (b) Transfer of Assets and Liabilities to the Successor Plan. --------------------------------------------------------- Subject to the completion of the asset transfer described in the next paragraph, Olin shall arrange for the transfer from the Olin Pension Plan to the Successor Plan and the Successor Plan shall assume and be responsible for all Liabilities of the Olin Pension Plan with respect to benefits accrued by Arch Employees and Subsequent Arch Employees (including disability pensions) through the Distribution Date (or through the date of transfer in the case of a Subsequent Arch Employee) and, effective upon such transfer, the members of the Olin Group shall have no further responsibility for such Liabilities. All Liabilities of the Olin Pension Plan attributable to Retained Arch Inactive Participants shall be retained by the Olin Pension Plan and the members of the Arch Group shall have no responsibility for such Liabilities. As soon as practicable after the Distribution Date, Olin shall cause to be transferred from the trust established under the Olin Pension Plan to the trust established under the Successor Plan a portion of the assets thereof, as provided hereinbelow. As soon as practical following the Distribution Date, the Enrolled Actuary will estimate preliminarily the amount of assets to be transferred by multiplying the fair market value of the assets in the trust established under the Olin Pension Plan as of the last day of the month prior to the Distribution Date by the ratio of (x) the Liabilities attributable to Arch Employees which shall be equal to the projected benefit obligations determined as of the Distribution Date of Arch Employees who are participants in the Olin Pension Plan to (y) all Liabilities under the Olin Pension Plan which shall be equal to the projected benefit obligations determined as 10 of the Distribution Date of all participants in the Olin Pension Plan (including Arch Former Employees and Olin Former Employees). Projected benefit obligations will be determined based on the assumptions used for purposes of Financial Accounting Standards No. 87 in the disclosure footnote in Olin's 1998 Annual Report to Shareholders (the "FAS 87 Assumptions"). If necessary, the amount determined to be transferred will be adjusted to comply with Code Section 414(l) as a result of the transfer to and assumption of Liabilities by the Successor Plan, as reasonably and equitably determined by the Enrolled Actuary using the asset allocation methodology set forth in Section 4044 of ERISA, the PBGC safe harbor assumptions referred to in Treasury Regulation Section 1.414(l)- 1(b)(5)(ii) and the pre-retirement withdrawal assumption used by Olin in the above-referenced FAS-87 disclosure. As soon as practicable after the Distribution Date and after receipt of the opinion of counsel described in Section 2.1(d) hereof, Olin shall cause 85% of the amount determined above (increased by interest at the settlement rate included in the FAS-87 Assumptions from the Distribution Date to the date of such transfer) to be transferred from the trust under the Olin Pension Plan to the trust established under the Successor Plan (the "Initial Transfer"). On or about August 31, 1999, Olin will cause an additional amount to be transferred to the trust established under the Successor Plan (the "Subsequent Transfer") equal to the excess of (i) the actual amount to be transferred as determined by the Enrolled Actuary using the methodology described above, over (ii) the amount previously transferred provided that such amount will be credited with interest at the settlement rate included in the FAS-87 Assumptions from the date of the Initial Transfer to the date of the Subsequent Transfer and shall be reduced by all benefit payments paid from the Olin Pension Plan to Arch Employees who retire or otherwise terminate employment on or after the Distribution Date but prior to the date of actual transfer. On or about February 1, 2000, the Enrolled Actuary will determine a net amount ("Net Amount") equal to the greater of the (i) the excess of (A) the additional assets and related Liabilities that are required to be transferred to the trust established under the Successor Plan from the trust established under the Olin Pension Plan as a result of Olin Employees who become Subsequent Arch Employees over (B) the additional assets and related Liabilities that should be transferred from the trust established under the Successor Plan to the trust established under the Olin Plan as a result of Arch Employees who become Subsequent Olin 11 Employees or (ii) the excess of (B) above over (A). Such Liabilities will be based on the individual's accrued benefit under the applicable plan as of the date of transfer of such individual. The assets representing the Net Amount to be transferred from the appropriate trust shall be based on the same proportionate percentage as applied in the preceding paragraph; provided, --------- however, that if necessary, the amount to be transferred will be adjusted to - -------- comply with Code Section 414(l). Interest (at the same rate as was used for the initial transfer) shall be credited on the Net Amount and transferred along with the Net Amount to the trust that will be receiving the transfer, which Net Amount will be transferred to the appropriate trust as soon as practicable. (c) Union Contracts. Arch shall honor and assume all rights and ---------------- obligations of Olin, and shall become the successor employer under union contracts covering Arch Employees and such employees will be eligible to participate in the Successor Plan subject to the provisions of any union consent required to implement paragraph (a) of this Section 2.1. (d) Implementation. Arch and Olin shall, in connection with the --------------- actions taken pursuant to this Section 2.1, cooperate in making any and all appropriate filings required under the Code or ERISA, and the regulations thereunder and any applicable securities laws, implementing all appropriate communications with participants, transferring appropriate records, and taking all such other actions as may be necessary and appropriate to implement the provisions of this Section 2.1 in a timely manner and to cause the transfer of assets pursuant to Section 2.1(b) to take place as soon as practicable after the Distribution Date (or in the case of a Subsequent Arch Employee, as soon as practicable following January 31, 2000); provided, however, that such transfer -------- ------- shall not take place until Olin receives an opinion of counsel satisfactory to Olin (or a copy of a favorable determination letter from the Internal Revenue Service) to the effect that the Successor Plan is in form qualified under Section 401(a) of the Code, and the related trust is in form exempt under Section 501(a) of the Code. Section 2.2. Supplemental Retirement Plans and Employment Agreements. -------------------------------------------------------- (a) Establishment of Successor Supplemental Retirement Plans. On or prior to --------------------------------------------------------- the Distribution Date, Arch shall establish nonqualified 12 Supplemental Retirement Plans for the benefit of Arch Employees and Subsequent Arch Employees that will contain terms that are substantially similar to those contained in the Olin Supplemental Plans. Arch agrees that each Arch Employee and Subsequent Arch Employee shall, for all purposes under the Supplemental Retirement Plans, be entitled to service, compensation and the accrued benefit (or account balance, as the case may be) credited to such Arch Employee as of the Distribution Date (or in the case of a Subsequent Arch Employee, the date of transfer) under the terms of the Olin Supplemental Plans as if such service had been rendered to Arch, as if such compensation had been paid by Arch and as if such accrued benefit (or account balance) had originally been credited to such Arch Employee under the Supplemental Retirement Plans of Arch provided that in the case of a Subsequent Arch Employee who is participating in an Arch Supplemental Retirement Plan that is a defined benefit plan, his or her benefit from such plan shall be offset by the benefit payable (regardless of whether or not actually paid) under the comparable Olin Supplemental Plan (assuming the terms of which do not change after the Distribution Date). All reserves and liabilities held under the Olin Supplemental Plans with respect to Arch Employees (who are determined to be Arch Employees on the Distribution Date) shall be transferred to Arch. Arch shall be responsible for all claims arising under the Supplemental Retirement Plans with respect to Arch Employees whether incurred before, on or after the Distribution Date and the Olin Group shall have no responsibility for such claims. All reserves and Liabilities determined through the date of transfer held under the Olin Supplemental Plans with respect to Subsequent Arch Employees shall remain with Olin. To the extent an Arch Employee becomes a Subsequent Olin Employee, any reserves and Liability for such Arch Employee under such Arch Supplemental Retirement Plan through the date of transfer shall be retained by Arch and if such individual is participating in an Olin Supplemental Plan that is a defined benefit plan, his or her benefit from such plan shall be offset by the benefit payable (regardless of whether or not actually paid) under the comparable Arch Supplemental Retirement Plan (assuming the terms which do not change after the Distribution Date). Olin shall include similar provisions in the Olin Supplemental Plans for Subsequent Olin Employees as the Arch Supplemental Retirement Plans include for Subsequent Arch Employees. (b) Olin's Supplemental Plans. Effective as of the Distribution -------------------------- Date, Olin shall continue to sponsor the 13 Olin Supplemental Plans, subject to the terms thereof. Olin hereby retains all liability for benefits (whether funded or unfunded) that have accrued prior to the Distribution Date under the Olin Supplemental Plans with respect to Arch Former Employees. (c) Supplemental Employment Agreements. Effective as of the ----------------------------------- Distribution Date, Arch shall assume and be solely responsible for all Liabilities of the Pre-Distribution Group relating to Supplemental Employment Agreements with Arch Employees. Arch and Olin shall cooperate in taking all actions necessary or appropriate to implement the foregoing, including amending any Supplemental Employment Agreement and obtaining any necessary consents of affected individuals. Section 2.3. Qualified Defined Contribution Plan. (a) Olin CEOP. ------------------------------------ ---------- As of the Distribution Date, Olin and Arch will take such steps as are necessary or desirable to convert the Olin CEOP into a multiple employer plan in which both Olin and Arch shall be participating employers. On and after the Distribution Date, employer contributions made on behalf of Arch Employees will be made solely by Arch. As of a date to be determined by Arch which may not be more than two years after the Distribution Date, Arch shall establish an Arch SIP and shall no longer participate in the Olin CEOP. Under the multiple employer plan, Arch Employees will become 100% vested in matching contributions following completion of five years of service (including prior service with Olin). Arch Common Stock received by Olin Employees in the Olin CEOP as a result of the Distribution that is attributable to (i) Olin contributions made before the Distribution may be retained in Arch Common Stock or reinvested in Olin Common Stock at the participant's election at any time and (ii) employee contributions may be retained in Arch Common Stock or reinvested in any other available option under the Olin CEOP at the participant's election at any time. Except as provided in the preceding sentence, contributions made to or held under the Olin CEOP on behalf of Olin Employees may not be invested in Arch Common Stock. Dividends on Arch Common Stock in accounts of Olin Employees will be reinvested in Olin Common Stock. Olin Common Stock held in the accounts of Arch Employees that is attributable to (i) Olin contributions made before the Distribution may be retained in Olin Common Stock or reinvested only in Arch Common Stock at the participant's election and (ii) employee contributions may be retained in Olin Common Stock or reinvested in any other available 14 option under the Olin CEOP at the participant's election. Except as provided in the preceding sentence, contributions after the Distribution Date made to or held under the Olin CEOP on behalf of Arch Employees may not be invested in Olin Common Stock. Dividends on Olin Common Stock in accounts of Arch Employees will be reinvested in Arch Common Stock. (b) Implementation. Olin and Arch shall cooperate in making all --------------- appropriate filings required under the Code or ERISA, and the regulations thereunder and any applicable securities laws, implementing all appropriate communications with participants, maintaining, and transferring appropriate records, and taking all such other actions as may be necessary and appropriate to implement the provisions of this Section 2.3. Section 2.4. Welfare Plans. (a) Pre-Retirement Welfare Plans. Arch -------------- ----------------------------- shall take, and shall cause the other members of the Arch Group to take, all actions necessary or appropriate to establish, on or before the Distribution Date, Arch U.S. Welfare Plans to provide each Arch Employee and Subsequent Arch Employee in the United States with benefits substantially similar to the benefits provided to him or her under the Olin U.S. Welfare Plans. The Arch Group shall assume, and shall be solely responsible for, all Liabilities in connection with unpaid health care and short-term and long-term disability claims by or in respect of Arch Employees in the United States for benefits under the Olin Welfare Plans whether incurred before, on or after the Distribution Date and the Olin Group shall have no responsibility for such claims. With respect to Subsequent Arch Employees, the Olin Group shall assume, and shall be solely responsible for all Liabilities in connection with unpaid health care and short-time and long-term disability incurred claims by or in respect of such individuals prior to their transfer to any member of the Arch Group and Arch shall be responsible for such claims incurred by or in respect of such individuals on or subsequent to such transfer. With respect to other benefits provided under Olin Welfare Plans (including job transition benefits, accidental death benefits, group-term life insurance and tuition aid): (i) the Arch Group shall assume, and shall be solely responsible for, all Liabilities for such claims payable to Arch Employees and/or Subsequent Arch Employees where the event giving rise to the claim occurs on or after the Distribution Date (or on or after the date of transfer for Subsequent Arch Employees) and the Olin Group shall have no responsibility for such claims and (ii) the Olin Group 15 shall assume, and be responsible for such claims payable to (A) Arch Participants and Subsequent Arch Employees where the event giving rise to the claim occurs prior to the Distribution Date (or in the case of a Subsequent Arch Employee, prior to the date of transfer) and (B) Olin Participants whether the claim incurred before, on or after the Distribution Date; and the Arch Group shall have no responsibility for such claims. Claims for tuition aid benefits shall be considered incurred when the semester or course is successfully completed. Olin shall take all actions necessary or appropriate to transfer a proportionate share of the assets held under the voluntary employee benefit association trust ("VEBA") maintained by Olin and attributable to long-term disability benefits to a VEBA established by Arch. Such proportionate share shall be equal to the product of (i) the fair market value of the assets in the VEBA as of the Distribution Date earmarked for long-term disability benefits and (ii) the ratio of the Liabilities for long-term disability benefits attributable to Arch Employees to the Liabilities for long-term disability benefits for Olin Employees, Olin Former Employees, Arch Employees and Arch Former Employees. In determining such Liabilities, a 7-1/2% interest assumption shall be used. Olin shall transfer the same proportionate share of reserves on its books to Arch for such long-term disability benefits. Olin shall retain responsibility for continuation health coverage benefits under the Olin Welfare Plans for Arch Former Employees providing health benefits under ERISA section 601(a) whether the claims are incurred before, on or after the Distribution Date. (b) Flexible Spending Account Plan. Prior to the Distribution Date, ------------------------------- Arch shall establish a flexible spending account plan (which shall provide benefits substantially similar to the Flexible Spending Account Plan of Olin Corporation) to assume Liabilities of Arch Employees and Subsequent Arch Employees in the Flexible Spending Account Plan of Olin Corporation. As soon as practicable after the Distribution Date (or in the case of a Subsequent Arch Employee, the date of transfer), Olin shall transfer to Arch an amount equal to the monies deducted from the compensation of such individuals during the calendar year in which the Distribution Date occurs reduced by the amount of benefits paid under such plan during such year. Olin and Arch shall take all other action necessary or appropriate so that, effective as of the Distribution Date, Arch shall assume and be solely responsible for all flexible spending account 16 Liabilities of such individual under its flexible spending account plan. Olin shall retain liability for Arch Former Employees and for any claims incurred in the calendar year preceding the year of the Distribution under the Flexible Spending Account Plan of Olin Corporation. (c) Assigned Split Dollar and Corporate-Owned Life Insurance -------------------------------------------------------- Policies. Olin and Arch shall take all actions necessary or appropriate to - --------- assign to Arch, effective as of the Distribution Date, all of the rights and interests of the Pre-Distribution Group in the split dollar life insurance policies insuring the lives of Arch Participants pursuant to the Split Dollar Life Insurance Program (such policies, the "Assigned Split Dollar Policies"). Such actions shall include Arch's acceptance of any collateral assignments, policy endorsements or such other documentation executed by or on behalf of such Arch Participants or any trustee of any trust to which any Arch Participant's policy rights or incidents of ownership under the Assigned Split Dollar Policies have been assigned, and Arch's entering into such agreements as may be necessary to fulfill any obligations of Olin to any insurance company or insurance agent or broker under Assigned Split Dollar Policies. From and after the date of the assignment of any Assigned Split Dollar Policy to Arch, Arch shall assume and be solely responsible for all Liabilities, and shall be entitled to all benefits, of the Pre-Distribution Group to the applicable Arch Participant under his or her Split Dollar Policy, including under any related agreements entered into by such Arch Participant or any such trustee. Olin shall retain and pay any premiums or take any action required to keep any corporate-owned life insurance ("COLI") insuring the lives of Arch Participants in force. Olin shall be entitled to the life insurance proceeds when payable and Olin shall pay the related $5,000 to the Arch Participant's Beneficiary when payable in accordance with COLI plan provisions. For purposes of COLI, the Arch Participant will be deemed to be an Olin Employee. (d) Post-Retirement Medical and Life Insurance Benefits. Effective ---------------------------------------------------- as of the Distribution Date, Olin shall continue to sponsor the retiree medical benefit and life insurance plans of Olin. Olin agrees that it will retain all liability with respect to medical and life insurance benefits provided to Arch Former Employees who retired or otherwise terminated prior to the Distribution Date. Effective as of the Distribution Date, Arch shall adopt a 17 medical benefit plan substantially similar to Olin's retiree benefits plan program. Such plan shall provide credit to Arch Employees and Subsequent Arch Employees for service with Olin on the same basis as credit for such service was provided under Olin's plan. Other than possible increases in employee contributions, Arch agrees that the benefits provided under its retiree medical benefits program shall not be reduced or terminated prior to the fifth anniversary of the Distribution Date. Arch hereby agrees to assume, and shall indemnify and hold Olin harmless from and against, all claims brought against any member of the Olin Group under Olin's retiree medical benefit plans by any Arch Employee or Subsequent Arch Employee who retires after the Distribution Date. If an Arch Employee is transferred to Olin or any of its Affiliates by the Arch Group on or prior to January 31, 2000, Olin shall be responsible for such individual's retiree medical benefits. (e) Implementation. Olin agrees to provide Arch or its designated --------------- representative with such information (in the possession of a member of the Olin Group and not already in the possession of a member of the Arch Group) as may be reasonably requested by Arch in order to carry out the requirements of this Section 2.4. Section 2.5. Options. (a) Arch Long Term Incentive Plan. Arch -------- ------------------------------ shall take all actions necessary or appropriate to establish on or before the Distribution Date the Arch Chemicals, Inc. 1999 Long Term Incentive Plan which shall contain terms that are substantially similar to the terms provided under the Olin 1991 Long Term Incentive Plan. (b) Olin Options. Olin and Arch shall take all actions necessary or ------------- appropriate so that each Olin Option is adjusted and/or replaced as set forth below. (1) Certain Employees and Former Employees of the Olin Group. This --------------------------------------------------------- Section 2.5(b)(1) sets forth the treatment in the Distribution of each Olin Option that is, as of the Distribution Date, outstanding and held by an Olin Employee employed by (or Olin Former Employee formerly employed by) a member of the Olin Group other than Olin, or a Beneficiary of any such Employee. Each such Olin Option ("Pre-Adjustment Option") shall be adjusted to constitute an Olin option (a "New Olin Option") and an Arch SAR. With respect to each New Olin Option (i) the number of shares of Olin Common Stock subject to such New Olin Option shall equal the number of shares of Olin Common Stock subject to 18 the Pre-Adjustment Option, and (ii) the per-share exercise price of such New Olin Option shall equal the per-share exercise price of such Pre-Adjustment Option, as applicable, multiplied by the Olin Ratio (rounded down to the nearest whole cent). With respect to each such Arch SAR (i) the number of shares of Arch Common Stock subject to such Arch SAR shall equal the number of shares of Olin Common Stock subject to the Pre-Adjustment Option multiplied by the Distribution Ratio (rounded up to the nearest whole share), and (ii) the per-share base amount of such Arch SAR shall equal the per-share exercise price of such Pre- Adjustment Option multiplied by the Arch Ratio (and then rounded down to the nearest whole cent). (2) Other Olin Participants and Arch Participants. This Section ---------------------------------------------- 2.5(b)(2) sets forth the treatment in the Distribution of each Olin Option that is, as of the Distribution Date, outstanding and held by an Olin Participant (other than one described in Section 2.5(b)(1)), or by an Arch Participant. As of the Distribution Date, each such outstanding Olin Option shall be adjusted to constitute two options (one a "New Olin Option" and the other an "Arch Option") as provided in this Section 2.5(b)(2). With respect to each such New Olin Option, (i) the number of shares of Olin Common Stock subject to such New Olin Option, shall equal the number of shares of Olin Common Stock subject to the Pre-Adjustment Option, and (ii) the per-share exercise price of such New Olin Option shall equal the per-share exercise price of such Pre-Adjustment Option, as applicable, multiplied by the Olin Ratio (rounded down to the nearest whole cent). With respect to each such Arch Option (i) the number of shares of Arch Common Stock subject to such Arch Option shall equal the number of shares of Olin Common Stock subject to the Pre-Adjustment Option multiplied by the Distribution Ratio (rounded up to the nearest whole share), and (ii) the per- share exercise price of such Arch Option shall equal the per-share exercise price of such Pre-Adjustment Option multiplied by the Arch Ratio (rounded down to the nearest whole cent). (c) Terms of Options and Arch SARs. The terms and conditions of each ------------------------------- New Olin Option, Arch Option and/or Arch SAR adjusted pursuant to this Section 2.5 shall be the same as those of the Olin Option it replaces, except as otherwise specifically provided in this Section 2.5 and except that (1) in the case of such options issued under the Olin 1980 Stock Option Plan to individuals who become Arch 19 Employees, such options shall expire no later than on the earlier of (i) the end of their original term or (ii) the second anniversary of the Distribution Date, or (2) in the case of such options issued under the Olin 1988 Stock Option Plan or the Olin 1996 Stock Option Plan to individuals who become Arch Employees, such options shall expire no later than at the end of their original term. With respect to individuals who become Arch Employees, references to employment with or termination of employment with the Olin Group shall be changed to references to employment with or termination of employment with the Arch Group, and (ii) other references to the Olin Group shall be changed to references to the Arch Group as appropriate. (d) Delivery of Shares and Cash. Effective as of the Distribution ---------------------------- Date, New Olin Options and Arch Options held by Arch Employees shall be transferred to the Arch Chemicals, Inc. 1999 Long Term Incentive Plan. New Olin Options, Arch Options and Arch SARs held by Olin Employees, Olin Former Employees, Subsequent Arch Employees and Arch Former Employees shall be retained by the Olin Incentive Plans. Olin shall be solely responsible for the delivery of Olin Common Stock upon exercise of New Olin Options in exchange for payment of the exercise price and Arch shall be solely responsible for the delivery of Arch Common Stock upon exercise of Arch Options, in each case in exchange for payment of the applicable exercise price. Olin shall assume and be solely responsible for all Liabilities with respect to Arch SARs which shall be issued under the Olin Incentive Plans. Any adjustment to or cash-out of New Olin Options made by Olin in accordance with the Olin Incentive Plans shall apply to all outstanding New Olin Options including those transferred to an Arch Plan and Olin shall be liable for such adjustment or cash-out. Similarly, any adjustment to or cash-out of Arch Options made by Arch in accordance with the Arch Chemicals, Inc. 1999 Long Term Incentive Plan shall apply to all outstanding Arch Options resulting from the Distribution, including those held under Incentive Plans, and Arch shall be liable for such adjustment or cash-out. (e) Implementation. Olin and Arch shall each maintain a registration --------------- statement on Form S-8 to cover all of their respective outstanding options, regardless of who holds such options. Notwithstanding the foregoing provisions of this Section 2.5, if either Olin or Arch determines that because of legal, accounting, tax, and/or regulatory rules or requirements applicable to options, or 20 restricted stock in any jurisdiction outside the United States, compliance with any of its obligations under this Section 2.5 with respect to options, or restricted stock held by or to be issued to any individual employed outside the United States would be impossible, illegal, impracticable or unreasonably expensive, it shall so notify the other party, and Arch and Olin shall use their best efforts to agree to appropriate alternative arrangements. Section 2.6. Executive and Director Compensation Plans. (a) 1998 ----------------------------------------- ---- Incentive Awards. Arch Employees and Former Arch Employees who were - ----------------- participating in the EVA Management Incentive Compensation Plan will be entitled to receive an annual incentive bonus award with respect to 1998 performance assuming plan provisions are satisfied. (b) Other Equity Awards. Olin shall continue to sponsor the Olin -------------------- 1991 Long-Term Incentive Plan for the benefit of Olin Participants and Former Arch Employees. Immediately prior to the Distribution Date, holders of Olin Restricted Stock Units (whether an Olin Participant or an Arch Participant) shall be credited with one Arch Restricted Stock Unit for every two Olin Restricted Stock Units credited to them under an Olin Plan. Such Arch Restricted Stock Units shall be subject to substantially the same restrictions as the Olin Restricted Stock Units except that with respect to Arch Employees, any requirement for continued employment with the Olin Group shall be deemed to refer to continued employment with the Arch Group. All liability for Olin Restricted Stock Units and Arch Restricted Stock Units held by Arch Employees shall be transferred to the Arch Chemicals, Inc. 1999 Long Term Incentive Plan immediately prior to the Distribution Date and all reserves related to such units attributable to Arch Employees who are determined to be Arch Employees on the Distribution Date shall be transferred to Arch. Olin shall take all actions necessary or appropriate to provide that each individual who is expected to become an Arch Employee who has "Olin Performance Unit Plan" retention units shall have the payment of such units accelerated and paid out prior to the Distribution Date in Olin Common Stock. (c) Deferred Compensation Plan. Olin will continue to sponsor the --------------------------- Olin Corporation Employee Deferral Plan ("Olin Deferral Plan") for the benefit of Olin Participants and Arch Former Employees. Arch shall take all actions necessary or appropriate to establish before the Distribution Date, a Deferred Compensation Plan which shall 21 contain terms that are substantially similar to the terms contained in the Olin Deferral Plan. Immediately prior to the Distribution Date, participants in the Olin Deferral Plan (whether Olin Participants or Arch Participants) who have an account invested in phantom shares of Olin Common Stock shall be credited with one phantom share of Arch Common Stock for every two phantom shares of Olin Common Stock credited to their accounts. All liability for phantom shares of Arch Common Stock and Olin Common Stock credited to Arch Employees and related cash accounts for such employees and all related reserves attributable to Arch Employees who are determined to be Arch Employees on the Distribution Date shall be transferred to Arch immediately prior to the Distribution Date. (d) Benefits for Non-Employee Directors. Arch shall take all actions ------------------------------------ necessary or appropriate to establish on or before the Distribution Date, a stock plan for non-employee directors which shall contain terms that are similar to the terms contained in the Olin Corporation 1997 Stock Plan for Non-Employee Directors; provided, however, that in lieu of or in addition to the annual -------- ------- grants of shares of Arch Common Stock to non-employee directors, the board of directors of Arch may elect to grant options to purchase shares of Arch Common Stock and/or performance shares. Phantom shares of Olin Common Stock and Arch Common Stock (after an adjustment which is similar to the Distribution) credited to Arch directors will be transferred to the Arch stock Plan for non-employee directors. (e) Dividend Equivalents. Dividend equivalent units on Olin --------------------- Restricted Stock Units and phantom shares of Olin Common Stock will be reinvested in Olin Restricted Stock Units and phantom shares of Olin Common Stock, respectively. Similarly, dividend equivalent units on Arch Restricted Stock Units and phantom shares of Common Stock will be reinvested in Arch Restricted Stock Units and phantom shares of Arch Common Stock, respectively. Effective as of the Distribution Date, (i) Arch shall assume and be solely responsible for all Liabilities (whether accrued, contingent or otherwise) with respect to dividend equivalent units on awards held by Arch Employees, and (ii) Olin shall assume or retain, as applicable, and be solely responsible for all Liabilities (whether accrued, contingent or otherwise) with respect to dividend equivalent units on awards held by Olin Participants or Former Arch Employees. 22 ARTICLE III Foreign Plans ------------- Section 3.1. General Principles. This Section 3.1 sets forth certain ------------------- general principles relating to Foreign Plans; however, exceptions may be made to those general principles as set forth in Section 3.2. Olin and Arch shall take all actions necessary or appropriate so that, effective no later than the Distribution Date, all Foreign Plans have been divided and/or new Foreign Plans established (to the extent necessary) so that all benefits of Olin Participants under Foreign Plans (whether accrued or payable before, on or after the Distribution Date) are provided by Olin Foreign Plans, and all benefits of Arch Participants under Foreign Plans (whether accrued or payable before, on or after the Distribution Date) are provided by Arch Foreign Plans. If any Foreign Plan that is separated into an Olin Foreign Plan and an Arch Foreign Plan in connection with or in anticipation of the Distribution is funded through a trust, insurance contract or other funding vehicle, then such funding vehicle shall be divided between such Olin Foreign Plan and Arch Foreign Plan on an equitable basis. From and after the Distribution Date: (i) the members of the Olin Group and the Olin Foreign Plans shall assume or retain, as applicable, and shall be solely responsible for, all Liabilities of the Pre-Distribution Group arising out of or relating to the Olin Foreign Plans; and (ii) the members of the Arch Group and the Arch Foreign Plans shall assume or retain, as applicable, and shall be solely responsible for, all Liabilities arising out of or relating to the Arch Foreign Plans. Section 3.2. Exceptions to General Principles. Olin and Arch --------------------------------- recognize that it is possible that, in certain cases, applicable law may prohibit the implementation of the general principles set forth in Section 3.1, or that there may be special circumstances making such implementation inadvisable or impractical. In all such cases, such general principles shall not be implemented and Olin and Arch shall use best efforts to develop and implement an alternative approach, and shall enter into such additional agreements as may be necessary or appropriate in connection therewith. 23 ARTICLE IV General Provisions ------------------ Section 4.1. Employment Transfers; Severance Pay. (a) Arch and Olin ------------------------------------ shall take all steps necessary and appropriate so that, on or immediately after the Distribution Date, all individuals who have been designated to be Arch Employees are employed by a member of the Arch Group, and all individuals who have been designated to be Olin Employees are employed by a member of the Olin Group. (b) Arch and Olin agree that, except as specifically provided by law or otherwise in this Agreement, individuals who, in connection with the Distribution, cease to be Olin Employees and become Arch Employees shall not be deemed to have experienced a termination or severance of employment from Olin and its subsidiaries for purposes of any Olin Plan that provides for the payment of severance, redundancy, salary continuation or similar benefits. Section 4.2. Recognition of Olin Employment Service, Etc. The Arch -------------------------------------------- Plans shall, to the extent permitted by applicable law, recognize service before the Distribution with the Pre-Distribution Group as service with the Arch Group. Each Arch Welfare Plan shall, to the extent permitted by applicable law, provide benefits to Arch Employees without interruption or change solely as a result of the transition from the corresponding Olin Welfare Plans, and, without limiting the generality of the foregoing: (a) shall, to the extent applicable, recognize all amounts applied to deductibles, out-of-pocket maximums and lifetime maximum benefits with respect to Arch Employees under the corresponding Olin Welfare Plan for the plan year that includes the Distribution Date and for prior periods (if applicable); (b) shall, to the extent applicable, not impose any limitations on coverage of preexisting conditions of Arch Employees except to the extent such limitations applied to such Arch Employees under the corresponding Olin Welfare Plan immediately before such Arch Welfare Plan became effective; and (c) shall not impose any other conditions (such as proof of good health, evidence of insurability or a requirement of a physical examination) upon the participation by Arch Employees who were participating in the corresponding Olin Welfare Plan immediately before such Arch Welfare Plan became effective. 24 Section 4.3. Workers' Compensation. Arch shall be responsible for ---------------------- all workers' compensation claims payable to or on behalf of Arch Participants and Subsequent Arch Employees whether arising before, on or after the Distribution Date; provided, however, that with respect to such individuals -------- ------- receiving or entitled to receive workers' compensation benefits on the Distribution Date, Olin shall pay or cause to be paid such benefits on and after the Distribution Date and shall be reimbursed for such payments by Arch to the extent not covered by Olin's insurance. Accruals for such Liabilities shall be transferred to Arch. ARTICLE V Miscellaneous ------------- Section 5.1. Guarantee of Subsidiaries' Obligations. Each of the --------------------------------------- parties hereto shall cause to be performed, and hereby guarantees the performance and payment of, all actions, agreements, obligations and Liabilities set forth herein to be performed or paid by any Subsidiary of such party which is contemplated by the Distribution Agreement to be a Subsidiary of such party on or after the Distribution Date. Section 5.2. Disputes. (a) In any case in which Arch or Olin shall --------- disagree with the determination of an amount which this Agreement requires to be made by the Enrolled Actuary, each such disagreeing party shall have the right, within 30 days after receipt of notice of such determination, to engage, at its own expense, an independent expert to make the determination of such amount. If the amount determined by such independent experts should differ, such amount shall be reasonably and equitably determined by another independent expert selected by agreement between or among the Enrolled Actuary and such independent experts. (b) Any other dispute, controversy or claim arising out of or relating to this Agreement shall be governed by Article V of the Distribution Agreement. Section 5.3. Sharing of Information. Each of Olin and Arch shall, ----------------------- and shall cause each of the other members of their respective Groups to, provide to the other all such information in its possession as the other may reasonably request to enable it to administer its employee benefit plans and programs, and to determine the scope of, 25 and fulfill, its obligations under this Agreement. Such information shall, to the extent reasonably practicable, be provided in the format and at the times and places requested, but in no event shall the party providing such information be obligated to incur any direct expense not reimbursed by the party making such request, nor to make such information available outside its normal business hours and premises except as the parties otherwise specifically agree. The right of the parties to receive information hereunder shall, without limiting the generality of the foregoing, extend to any and all reports, and the data underlying such reports, prepared by the Enrolled Actuary in making any determination under this Agreement or by any third party engaged pursuant to Section 5.2. Section 5.4. Termination. This Agreement shall be terminated in the ------------ event that the Distribution Agreement is terminated and the Distribution abandoned prior to the Distribution Date. In the event of such termination, neither party shall have any liability of any kind to the other party. Section 5.5. Rights To Amend or Terminate Plans; No Third Party -------------------------------------------------- Beneficiaries. Except as provided in Section 2.4(d), no provision of this - -------------- Agreement shall be construed (a) to limit the right of Olin, any other member of the Olin Group, Arch or any other member of the Arch Group to amend any Plan or terminate any Plan, or (b) to create any right or entitlement whatsoever in any Employee, former Employee or Beneficiary, including a right to continued employment or to any benefit under a Plan or any other compensation. This Agreement is solely for the benefit of the parties hereto and their respective subsidiaries and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. Section 5.6. Complete Agreement. This Agreement and the agreements ------------------- and other documents referred to herein shall constitute the entire agreement between the parties hereto with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. Section 5.7. Governing Law. Subject to applicable U.S. federal law, -------------- this Agreement shall be governed by and construed in accordance with the laws of the 26 Commonwealth of Virginia applicable to contracts executed therein and to be performed therein as to all matters, including matters of validity, construction, effect, performance and remedies. Section 5.8. Notices. All notices, requests, claims, demands and -------- other communications hereunder shall be given in accordance with the provisions of Section 8.08 of the Distribution Agreement. Section 5.9. Amendment and Modification. This Agreement may be --------------------------- amended, modified or supplemented only by a written agreement signed by both of the parties hereto. Section 5.10. Successors and Assigns. This Agreement and all of the ----------------------- provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns, but neither this Agreement nor any of the rights, interests and obligations hereunder shall be assigned by any party hereto without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed). 27 SECTION 5.11. Consent to Jurisdiction. Without limiting the ------------------------ provisions of Article V of the Distribution Agreement, each of the parties irrevocably submits to the exclusive personal jurisdiction and venue of (a) the Circuit Court of Henrico County, Commonwealth of Virginia, and (b) the United States District Court for the Eastern District of Virginia (Richmond Division), for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the Eastern District of Virginia (Richmond Division) or if such suit, action or other proceeding may not be brought in such court for juris dictional reasons, in the Circuit Court of the Henrico County, Commonwealth of Virginia. Each of the parties further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth in the Distribution Agreement shall be effective service of process for any action, suit or proceeding in Virginia with respect to any matters to which it has submitted to jurisdiction in this Section 5.11. Each of the parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Circuit Court of Henrico County, Commonwealth of Virginia, or (ii) the United States District Court for the Eastern District of Virginia (Richmond Division), and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum, and the right to object, with respect to such action, suit or proceeding, that such court does not have jurisdiction over such Party. Section 5.12. Counterparts. This Agreement may be executed in two or ------------- more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 5.13. Interpretation. The Article and Section headings --------------- contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties hereto and shall not in any way affect the meaning or interpretation of this Agreement. 28 Section 5.14. Legal Enforceability. Any provision of this Agreement --------------------- which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Each party acknowledges that money damages would be an inadequate remedy for any breach of the provisions of this Agreement and agrees that the obligations of the parties hereunder shall be specifically enforceable. Section 5.15. References; Construction. References to any "Article" ------------------------- or "Section" without more, are to Articles or Sections to or of this Agreement. Unless otherwise expressly stated, "including", "includes" or "include" shall be deemed followed by the words "without limitation". IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. OLIN CORPORATION, by ----------------------------------- Name: Johnnie M. Jackson, Jr. Title: Vice President, General Counsel and Secretary ARCH CHEMICALS, INC., by ----------------------------------- Name: Sarah A. O'Connor Title: Vice President EX-12 11 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 OLIN CORPORATION AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED)
(IN MILLIONS) YEARS ENDED DECEMBER 31, ------------------------------------------------- 1998 1997 1996 1995 1994 ------ ------ ------ ------ ------ Earnings: Income from continuing operations before taxes $ 59 $ 147 $ 352 $ 137 $ 77 Add (deduct): Equity in (income)loss of non-consolidated affiliates - (1) (2) (2) 1 Dividends received from non-consolidated affiliates - 1 1 1 1 Interest capitalized, net of amortization (1) - (2) - - Fixed charges as described below 31 36 42 55 47 ------ ------ ------ ------ ------ Total $ 89 $ 183 $ 391 $ 191 $ 126 ====== ====== ====== ====== ====== Fixed charges: Interest expense $ 18 $ 25 $ 30 $ 44 $ 37 Estimated interest factor in rent expense 13 11 12 11 10 ------ ------ ------ ------ ------ Total $ 31 $ 36 $ 42 $ 55 $ 47 ====== ====== ====== ====== ====== Ratio of earnings to fixed charges(a) 2.9 5.1 9.3 3.5 2.7 ====== ====== ====== ====== ======
(a) Computation of ratio of earnings to fixed charges has been restated to reflect the spin-off of Arch Chemicals, Inc. EX-21 12 LIST OF SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF OLIN CORPORATION/1/ (as of February 8, 1999)
- ------------------------------------------------------------------------------------------------------------ Company Domestic % Ownership Jurisdiction - ------------------------ ----------------- ------------ (Direct/Indirect) - ------------------------------------------------------------------------------------------------------------ A.J. Oster Caribe, Inc. 100 DE - ------------------------------------------------------------------------------------------------------------ A.J. Oster Foils, Inc. 100 DE - ------------------------------------------------------------------------------------------------------------ A.J. Oster West, Inc. 100 RI - ------------------------------------------------------------------------------------------------------------ A O Holdings, Inc. 100 DE - ------------------------------------------------------------------------------------------------------------ Aegis, Inc. 100 MA - ------------------------------------------------------------------------------------------------------------ Bridgeport Brass Corporation/2/ 100 IN - ------------------------------------------------------------------------------------------------------------ Bryan Metals, Inc./3/ 100 OH - ------------------------------------------------------------------------------------------------------------ Hunt Trading Co. 100 MO - ------------------------------------------------------------------------------------------------------------ Lectranator Corporation 100 OH - ------------------------------------------------------------------------------------------------------------ Olin Asahi Interconnect Technologies 100 DE - ------------------------------------------------------------------------------------------------------------ Olin Benefits Management, Inc./4/ 90 CA - ------------------------------------------------------------------------------------------------------------ Olin Engineered Systems, Inc. 100 DE - ------------------------------------------------------------------------------------------------------------ Olin Environmental Management, Inc./4/ 90 DE - ------------------------------------------------------------------------------------------------------------ Olin Far East, Limited 100 DE - ------------------------------------------------------------------------------------------------------------ Olin Financial Services Inc. 100 DE - ------------------------------------------------------------------------------------------------------------ Olin Sunbelt, Inc. 100 DE - ------------------------------------------------------------------------------------------------------------ Sunbelt Chlor Alkali Partnership 50 DE - ------------------------------------------------------------------------------------------------------------ Nutmeg Insurance Limited 100 Bermuda - ------------------------------------------------------------------------------------------------------------ Olin Asia Pacific Pte. Ltd. 100 Singapore - ------------------------------------------------------------------------------------------------------------ Olin Australia Limited 100 Australia - ------------------------------------------------------------------------------------------------------------ Olin Brass Japan, Inc. 100 Japan - ------------------------------------------------------------------------------------------------------------ Olin Canada Inc. 100 Canada - ------------------------------------------------------------------------------------------------------------ Olin Corporation N.Z. Limited 100 New Zealand - ------------------------------------------------------------------------------------------------------------ Olin Export Trading Corporation 100 U.S. Virgin Islands - ------------------------------------------------------------------------------------------------------------ Olin Hunt Specialty Products S.r.l. 100 Italy - ------------------------------------------------------------------------------------------------------------ Olin Mexico S.A. de C.V. 100 Mexico - ------------------------------------------------------------------------------------------------------------ Reductone Brasil Ltda. 100 Brazil - ------------------------------------------------------------------------------------------------------------ Yamaha-Olin Metal Corporation 50 Japan - ------------------------------------------------------------------------------------------------------------
1 There are omitted from the following list the names of certain subsidiaries which, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. 2 d/b/a "Olin Brass, Indianapolis" and "Olin Brass, Indianapolis Facility" in CA, IL, IN, NJ, NC, OH, PA, RI and TX. 3 d/b/a "Bryan Metals of Ohio" in NJ. 4 Class A shares, all of which are held directly and indirectly by Olin Corporation, have the right to elect 4 directors. Class B shares, none of which are held directly or indirectly by Olin Corporation, have the right to elect 1 director. EX-23 13 CONSENT OF KPMG LLP DATED 03/16/99 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS The Board of Directors Olin Corporation: We consent to the incorporation by reference in Registration Statements No. 33-4479 and No. 33-52771 on Form S-3 and Nos. 33-28593, 33-00159, 33-40346, 33-41202, 333-05097, 333-17629, 333-18619, 333-39305, 333-39303 and 333-71693 on Form S-8 of Olin Corporation of our report dated January 26, 1999, relating to the consolidated balance sheets of Olin Corporation and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1998, which report is included in the December 31, 1998 annual report on Form 10-K of Olin Corporation. KPMG LLP Stamford, Connecticut March 16, 1999 EX-27.A 14 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Financial Statements contained in Item 8 of Form 10-K for the period ended December 31, 1998 and is qualified in its entirety by reference to such financial statements. Figures are rounded to the nearest 1,000,000 (except EPS). YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 50 25 162 (6) 199 517 1,550 (1,075) 1,577 292 230 0 0 46 744 1,577 1,426 1,426 1,161 1,161 0 1 17 59 21 38 40 0 0 78 1.64 1.63
EX-27.B 15 RESTATED FINANCIAL SCHEDULE
5 This schedule has been restated as required by Item 601(c)(2)(iii) of Regulation S-K to reflect the spin-off of Arch, Inc, effective February 8, 1999. Figures are rounded to the nearest 1,000,000 (except EPS). 1000 9-MOS 6-MOS 3-MOS DEC-31-1998 DEC-31-1998 DEC-31-1998 JAN-01-1998 JAN-01-1998 JAN-01-1998 SEP-30-1998 JUN-30-1998 MAR-31-1998 109 23 71 0 0 0 209 174 177 0 0 0 208 229 219 566 463 501 1,587 1567 1,552 (1,086) (1,067) (1,045) 1,599 1,609 1,673 301 282 309 230 231 262 0 0 0 0 0 0 47 48 48 785 820 817 1,599 1,609 1,673 1,090 707 359 1,090 707 359 892 572 287 892 572 287 0 0 0 0 0 0 14 9 5 43 62 35 14 22 12 29 40 23 41 38 16 0 0 0 0 0 0 70 78 39 1.47 1.61 0.81 1.45 1.60 0.80
EX-27.C 16 RESTATED FINANCIAL DATA SCHEDULE
5 This schedule has been restated as required by Item 601 (c)(2)(iii) of Regulation S-K to reflect the spin-off of Arch Chemicals, Inc., effective February 8, 1999. Such Item does not require balance sheet information for the fiscal year 1996 to be included and zero's have been inserted in lieu of such information for such year. Figures are rounded to the neares 1,000,000 (except EPS). YEAR 9-MOS 6-MOS 3-MOS YEAR DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1996 JAN-01-1997 JAN-01-1997 JAN-01-1997 JAN-01-1997 JAN-01-1996 DEC-31-1997 SEP-30-1997 JUN-30-1997 MAR-31-1997 DEC-31-1996 157 34 77 334 0 28 0 0 0 0 166 198 170 176 0 (6) 0 0 0 0 208 212 217 207 0 602 547 551 820 0 1,546 1,479 1,472 1,461 0 (1,029) (995) (976) (962) 0 1,707 1,704 1,725 1,968 0 329 317 302 510 0 262 262 263 271 0 0 0 0 0 0 0 0 0 0 0 49 49 50 51 0 830 848 865 882 0 1,707 1,704 1,725 1,968 0 1,499 1,118 733 366 1,758 1,499 1,118 733 366 1,758 1,203 896 595 294 1,396 1,203 896 595 294 1,396 0 0 0 0 0 1 0 0 0 1 24 20 15 7 27 147 107 65 37 352 50 37 22 13 125 97 70 43 24 227 56 48 37 18 53 0 0 0 0 0 0 0 0 0 0 153 118 80 42 280 3.02 2.32 1.56 0.81 5.34 3.00 2.30 1.55 0.80 5.27
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