Exhibit 10.12
FORM OF EXECUTIVE AGREEMENT
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Agreement between Arch Chemicals, Inc., a Virginia corporation ("Arch
Chemicals"), and ____________ (the "Executive"), dated as of ______________.
Arch Chemicals and the Executive agree as follows:
1. Definitions
As used in this Agreement:
(a) "Cause" means the willful and continued failure of the Executive to
substantially perform his or her duties; the willful engaging by the Executive
in gross misconduct significantly and demonstrably financially injurious to Arch
Chemicals; or willful misconduct by the Executive in the course of his or her
employment which is a felony or fraud. No act or failure to act on the part of
the Executive will be considered "willful" unless done or omitted not in good
faith and without reasonable belief that the action or omission was in the
interests of Arch Chemicals or not opposed to the interests of Arch Chemicals.
(b) "Change in Control" means:
(i) Arch Chemicals ceases to be, directly or indirectly, owned
of record by at least 1,000 stockholders;
(ii) A person, partnership, joint venture, corporation or other
entity, or two or more of any of the foregoing acting as a "person" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Act"), other than Arch Chemicals, a majority-owned subsidiary of Arch
Chemicals or an employee benefit plan (or the plan's related trust) of Arch
Chemicals or such subsidiary, become(s) the "beneficial owner" (as defined in
Rule 13d-3 under such Act) of 20% or more of the then outstanding voting stock
of Arch Chemicals;
(iii) During any period of two consecutive years, individuals who
at the beginning of such period constitute Arch Chemicals' Board of Directors
(together with any new Director whose election by Arch Chemicals' Board of
Directors or whose nomination for election by Arch Chemicals' stockholders was
approved by a vote of at least two-thirds of the Directors then still in office
who either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the directors then in office;
(iv) All or substantially all of the business of Arch Chemicals
is disposed of pursuant to a merger, consolidation or other transaction in which
Arch Chemicals is not the surviving corporation or Arch Chemicals combines with
another company and is the surviving corporation (unless the shareholders of
Arch Chemicals immediately following
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such merger, consolidation, combination, or other transaction beneficially own,
directly or indirectly, more than 50% of the aggregate voting stock or other
ownership interests of (x) the entity or entities, if any, that succeed to the
business of Arch Chemicals or (y) the combined company) or
(v) Approval by Arch Chemicals' shareholders of (i) a sale of
all or substantially all the assets of Arch Chemicals or (ii) a liquidation or
dissolution of Arch Chemicals.
(c) "Disability" means that the Executive has suffered an incapacity
due to physical or mental illness which meets the criteria for disability
established at the time under Arch Chemicals' short-term disability plan.
(d) "Executive Severance" means:
(i) twelve months of the Executive's then current monthly
salary (without taking into account any reductions which may have occurred at or
after the date of a Change in Control); plus
(ii) an amount equal to the greater of (A) the Executive's
average annual award actually paid under Arch Chemicals' short-term annual
incentive compensation plans or programs ("ICP") (including zero if nothing was
paid or deferred but including any portion thereof the Executive has elected to
defer) for the three completed fiscal years immediately preceding the date of
Termination (or if the Executive has not participated in ICP for such three
completed fiscal years, the average of any such awards for the shorter period of
years in which the Executive was a participant) and (B) the Executive's then
current ICP standard annual award.
(e) "Potential Change in Control" means:
(i) Arch Chemicals has entered into an agreement the
consummation of which would result in a Change in Control;
(ii) any person (including Arch Chemicals) publicly announces
an intention to take or to consider taking actions which if consummated would
constitute a Change in Control;
(iii) Arch Chemicals learns that any person (other than an
employee benefit plan of Arch Chemicals or a subsidiary of Arch Chemicals (or
the plan's related trust)) has become the beneficial owner directly or
indirectly of securities of Arch Chemicals representing 9.5% or more of the
combined voting power of Arch Chemicals' then outstanding securities ordinarily
entitled to vote in elections of directors; or
(iv) the Board of Directors of Arch Chemicals adopts a
resolution to the effect that, for purposes of this Agreement, a Potential
Change in Control of Arch Chemicals has occurred;
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provided, if an event specified in clause (iii) above has occurred by or on the
date hereof, such event shall not be deemed a Potential Change in Control unless
such person acquires another 1% of such securities subsequent to the date
hereof.
(f) "Termination" means:
(i) The Executive is discharged by Arch Chemicals other than for
Cause;
(ii) The Executive terminates his or her employment in the event
that:
(1) Arch Chemicals requires the Executive to relocate the
Executive's then office to an area which is not within reasonable commuting
distance, on a daily basis, from the Executive's then residence, except that
prior to a Change in Control a requirement to relocate the Executive's office to
Arch Chemicals' corporate headquarters is not a basis for Termination;
(2) Arch Chemicals reduces the Executive's base salary or
fails to increase the Executive's base salary on a basis consistent (as to
frequency and amount) with Arch Chemicals' exempt salary system as then in
effect or, in the event of a Change in Control, as in effect immediately prior
to the Change in Control;
(3) Arch Chemicals fails to continue the Executive's
participation in its benefit plans (including incentive compensation and stock
options) on substantially the same basis, both in terms of the amount of the
benefits provided (other than due to Arch Chemicals' or a relevant operation's
financial or stock price performance provided such performance is a relevant
criterion under such plan) and the level of the Executive's participation
relative to other participants as exists on the date hereof; provided that, with
respect to annual and long term incentive compensation plans, the basis with
which the amount of benefits and level of participation of the Executive shall
be compared shall be the average benefit awarded to the Executive under the
relevant plan during the three completed fiscal years immediately preceding the
date of Termination;
(4) The Executive suffers a Disability which prevents the
Executive from performing the Executive's duties with Arch Chemicals for a
period of at least 180 consecutive days;
(5) Following a Change in Control, Arch Chemicals fails to
substantially maintain its benefit plans as in effect at the time of the Change
in Control, unless reasonably equivalent arrangements (embodied in an on-going
substitute or alternative plan) have been made with respect to such plans; or
(6) The Executive's duties, position or reporting
responsibilities are diminished.
For purposes solely of clarification, it is understood that (i) if, in
connection with the spinoff of an Arch Chemicals business or Arch Chemicals'
assets as a separate public company to Arch Chemicals' shareholders, the
Executive accepts employment with, and
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becomes employed at, the spunoff company or its affiliates, the termination of
the Executive's employment with Arch Chemicals shall not be considered a
"Termination" for purposes of this Agreement, provided that a Change in Control
shall not have occurred prior to the termination of the Executive's employment
with Arch Chemicals and (ii) except as provided in paragraph 5(f), in connection
with the sale of an Arch Chemicals business to a third party or the transfer or
sale of an Arch Chemicals business or Arch Chemicals' assets to a joint venture
to be owned directly or indirectly by Arch Chemicals with one or more third
parties, if the Executive accepts employment with, and becomes employed by, such
buyer or its affiliates or such joint venture or its affiliates in connection
with such transaction, such cessation of employment with Arch Chemicals shall
not be considered a "Termination" for purposes of this Agreement.
2. Previous Change in Control Agreement. This Agreement supersedes and
replaces the Executive Agreement dated as of ________, 199__ between Arch
Chemicals and the Executive.(1)
3. Term/Executive's Duties.
(a) This Agreement expires at the close of business on September 30,
2002, unless prior to that date there is a Potential Change in Control or a
Change in Control, in which case this Agreement will expire on the later of (i)
the close of business on September 30, 2002, (ii) three years following the date
of the Potential Change in Control or (iii) three years following the date of
the Change in Control; provided that the expiration of this Agreement will not
affect any of the Executive's rights resulting from a Termination prior to such
expiration. In the event of the Executive's death while employed by Arch
Chemicals, this Agreement shall terminate and be of no further force or effect
on the date of his or her death; provided that the Executive's death will not
affect any of the Executive's rights resulting from a Termination prior to
death.
(b) During the period of the Executive's employment by Arch Chemicals,
the Executive shall devote his or her full time efforts during normal business
hours to Arch Chemicals' business and affairs, except during reasonable vacation
periods and periods of illness or incapacity. Nothing in this Agreement will
preclude the Executive from devoting reasonable periods required for service as
a director or a member of any organization involving no conflict of interest
with Arch Chemicals' interest; provided that no additional position as director
or member shall be accepted by the Executive during the period of his or her
employment with Arch Chemicals without its prior consent.
(c) The Executive agrees that in the event of any Potential Change in
Control of Arch Chemicals occurring from time to time after the date hereof, the
Executive will remain in the employ of Arch Chemicals until the earlier of (i)
the end of the six month period following the occurrence of such Potential
Change in Control and (ii) a Change in Control during which time the Executive
will have an office, title, duties and responsibilities substantially consistent
with those applicable immediately prior to such Potential Change in Control.
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(1) If Executive had a Tier II, use the following language instead: The
Agreement supersedes and replaces the Letter Agreement (Tier II), dated
__________, 19__, between Arch Chemicals and the Executive." If Executive is a
new hire, use the following: "This paragraph intentionally left blank."
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4. Executive Severance Payment
(a) In the event of a Termination occurring before the expiration of
this Agreement, Arch Chemicals will pay the Executive a lump sum in an amount
equal to the Executive Severance. The payment will be made within 10 days of the
Termination.
(b) In the event of a Termination after a Change in Control has
occurred, in addition to the Executive Severance paid under paragraph 4(a)
above, Arch Chemicals will pay a Change in Control severance premium to the
Executive in an amount equal to two times the Executive Severance. The Change in
Control severance premium, if it becomes due, will be made within 10 days of the
Termination.
(c) The amount due under paragraph 4(a) and 4(b), if any, will be
reduced to the extent that, if such amount in the aggregate were paid in equal
monthly installments over a 12-month period (or in the event both paragraph 4(a)
and 4(b) are applicable, a 36-month period), no installment would be paid after
the Executive's sixty-fifth birthday.
(d) The Executive will not be required to mitigate the amount of any
payment provided for in paragraph 4(a) or 4(b) by seeking other employment or
otherwise, nor shall any compensation received by the Executive from a third
party reduce such payment except as explicitly provided in this Agreement.
Except as may otherwise be expressly provided herein, nothing in this Agreement
will be deemed to reduce or limit the rights which the Executive may have under
any employee benefit plan, policy or arrangement of Arch Chemicals. Except as
expressly provided in this Agreement, payments made under paragraphs 4 or 5(e)
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim which Arch Chemicals may have against the Executive.
(e) If the Executive receives the Executive Severance, the Executive
will not be entitled to receive any other severance otherwise payable to the
Executive under any other severance plan of Arch Chemicals. If on the
Termination date the Executive is eligible and is receiving payments under any
then existing Arch Chemicals disability plan, then the Executive agrees that all
such payments may, and will be, suspended and offset for 12 months (or in the
event paragraph 4(b) is also applicable, 36 months) (subject to applicable law)
following the Termination date. If after such period the Executive remains
eligible to receive disability payments, then such payments shall resume in the
amounts and in accordance with the provisions of the applicable Arch Chemicals
disability plan.
(f) In the event the Executive, in connection with the sale of an Arch
Chemicals business to a third party or the transfer of an Arch Chemicals
business or Arch Chemicals assets to a joint venture which would be owned
directly or indirectly by Arch Chemicals with one or more third parties, ceases
to be employed by Arch Chemicals and with Arch Chemicals' consent becomes
employed by the buyer or its affiliates or the joint venture or its affiliates,
the Executive shall be entitled to the benefits provided under paragraph 4(a)
(using Arch Chemicals figures at the time of new employment) (subject to
paragraphs 4(c), 4(d) and 4(e)) and the first sentence of paragraph 5(a)
(subject to paragraph 5(c)), and paragraph 5(d), if the Executive has a
Termination as defined in paragraph 1(f) with his or her new employer (with the
new employer being substituted for Arch Chemicals
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in such paragraph 1(f) and without giving any effect to the Change in Control
references contained therein following such new employment) within 12 months of
becoming employed by such new employer. Any cash compensation amounts paid under
this paragraph 4(f) shall be reduced by any severance, job transition or
employment termination payments such Executive receives in cash from his or her
new employer in connection with the Termination. In connection with this
paragraph 5(f), in no event shall the Change in Control provisions of this
Agreement be applicable once Executive ceases to be employed by Arch Chemicals.
5. Other Benefits
(a) If the Executive becomes entitled to payment under paragraph 4(a),
the Executive will receive 12 months service credit under all Arch Chemicals
Pension Plans for which the Executive was eligible at the time of the
Termination (i.e., under Arch Chemicals' qualified Pension Plans to the extent
permitted under then applicable law, otherwise such credit will be reflected in
a supplementary pension payment from Arch Chemicals to be due at the times and
in the manner payments are due the Executive under such qualified pension
plans), and for 12 months from the date of the Termination the Executive
(including covered dependents) will continue to enjoy coverage on the same basis
as a similarly situated active employee under all Arch Chemicals medical,
dental, and life insurance plans to the extent the Executive was enjoying such
coverage immediately prior to the Termination. The Executive's entitlement to
insurance coverage under the Consolidated Omnibus Budget Reconciliation Act
would commence at the end of the period during which insurance coverage is
provided under this Agreement without offset for coverage provided hereunder.
The Executive shall accrue no vacation during the 12 months following the date
of Termination but shall be entitled to payment for accrued and unused vacation
for the calendar year in which the Termination occurs. If the Executive receives
the Executive Severance (including the amount referred to in paragraph
1(d)(ii)), the Executive shall not be entitled to an ICP award for the calendar
year of Termination if Termination occurs during the first calendar quarter.
Even if the Executive receives the Executive Severance (including the amount
referred to in paragraph 1(d)(ii)) and if Termination occurs during or after the
second calendar quarter, the Executive shall be entitled to a prorated ICP award
for the calendar year of Termination which shall be determined by multiplying
his or her then current ICP standard by a fraction the numerator of which is the
number of weeks in the calendar year prior to the Termination and the
denominator of which is 52. The Executive shall accrue no ICP award following
the date of Termination. The accrued vacation pay and ICP award, if any, shall
be paid in a lump sum when the Executive Severance is paid.
(b) If the Executive becomes entitled to payment under paragraph 4(b),
the pension credit and insurance coverage provided for in paragraph 5(a) will be
for an additional 24-month period beyond the period provided in paragraph 5(a).
(c) Notwithstanding the foregoing paragraphs 5(a) and 5(b), no such
service credit or insurance coverage will be afforded by this Agreement with
respect to any period after the Executive's sixty-fifth birthday.
(d) In the event of a Termination, the Executive will be entitled at
Arch Chemicals' expense to outplacement counseling and associated services in
accordance with Arch Chemicals' customary practice at the time (or, if a Change
in Control shall have
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occurred, in accordance with such practice immediately prior thereto) with
respect to its senior executives who have been terminated other than for Cause.
It is understood that the counseling and services contemplated by this paragraph
5(d) are intended to facilitate the obtaining by the Executive of other
employment following a Termination, and payments or benefits by Arch Chemicals
in lieu thereof will not be available to the Executive.
(e) Notwithstanding the provisions of Section 10 of the Arch Chemicals
Senior Executive Pension Plan (the "Senior Plan"), if the Executive is in active
employment with Arch Chemicals at the date of a Change in Control but has not
attained age 55 at such date, the Executive shall (if then a Participant in the
Senior Plan) nevertheless automatically be paid the lump-sum amount called for
by such Section 10, except that such lump-sum amount will be calculated first,
by calculating the sum equal to the annual benefit which would otherwise be
payable to the Executive at age 65 under all Arch Chemicals pension plans
assuming the Executive had terminated his or her employment with Arch Chemicals
on the date of the Change in Control, second, by multiplying such sum by 72%,
which is the current percentage applicable in the calculation of benefits paid
to employees retiring from active service with Arch Chemicals at age 55 under
the early retirement provisions of the Arch Chemicals Employees Pension Plan,
third, by determining the then lump-sum actuarial value of the product resulting
from the second step, and fourth, by deducting from such lump-sum actuarial
value the then lump-sum actuarial value of the Executive's accrued annual
benefits under all other Arch Chemicals pension plans. The actuarial value
shall be determined as the amount needed to purchase a fixed annuity through
Metropolitan Life Insurance Company ("Metropolitan") or its successor
immediately prior to the Change in Control. In the event such annuity is not
available through Metropolitan, then Prudential Insurance Company or an
insurance company with comparable rating by A.M. Best & Company shall be
substituted for Metropolitan. A lump-sum payment under this paragraph 5(e) will
be used to reduce any payments under the Senior Plan which may become due to the
Executive thereafter. The purpose of this paragraph 5(e) is to ensure that an
Executive who is less than age 55 at the time of the Change in Control receives
a lump-sum payment which when combined with the value of the Executive's pension
benefits from all other Arch Chemicals pension plans preserves the 72% age 55,
subsidized early retirement factor, rather than the actuarial reduction. Such
lump-sum payment shall be discounted by the same interest rate used by the
insurance company to determine the actuarial value to provide for the deferral
of the benefit until the Executive reaches age 55.
(f) If the Executive becomes entitled to the payment under paragraph 4(b),
at the end of the period for insurance coverage provided in accordance with
paragraph 5(b), the Executive shall be entitled to continue in Arch Chemicals'
medical and dental coverage (including dependent coverage) on terms and
conditions no less favorable to the Executive as in effect prior to the Change
in Control for the Executive until the Executive reaches age 65; provided that
if the Executive obtains other employment which offers medical or dental
coverage to the Executive and his or her dependents, the Executive shall enroll
in such medical or dental coverage, as the case may be, and the corresponding
coverage provided to the Executive hereunder shall be secondary coverage to the
coverage provided by the Executive's new employer so long as such employer
provides the Executive with such coverage.
(g) If there is a Change in Control, Arch Chemicals shall not reduce or
diminish the insurance coverage or benefits which are provided to the Executive
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under paragraph 5(a), 5(b) or 5(f) during the period the Executive is entitled
to such coverage; provided the Executive makes the premium payments required by
active employees generally for such coverage, if any, under the terms and
conditions of coverage applicable to the Executive. Following a Change in
Control, incentive compensation plans in which the Executive participates shall
contain reasonable financial performance measures and shall be consistent with
practice prior to the Change in Control.
6. Participation in Change in Control/Section 4999 of Internal Revenue
Code
(a) In the event that the Executive participates or agrees to
participate by loan or equity investment (other than through ownership of less
than 1% of publicly traded securities of another company) in a transaction
("acquisition") which would result in an event described in paragraph 1(b)(i) or
(ii), the Executive must promptly disclose such participation or agreement to
Arch Chemicals. If the Executive so participates or agrees to participate, no
payments due under this Agreement or by virtue of any Change in Control
provisions contained in any compensation or benefit plan of Arch Chemicals will
be paid to the Executive until the acquiring group in which the Executive
participates or agrees to participate has completed the acquisition. In the
event the Executive so participates or agrees to participate and fails to
disclose his or her participation or agreement, the Executive will not be
entitled to any payments under this Agreement or by virtue of Change in Control
provisions in any Arch Chemicals compensation or benefit plan, notwithstanding
any of the terms hereof or thereof.
(b) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that any payment or distribution by Arch
Chemicals to or for the benefit of the Executive (whether paid or payable or
distributed or distributable) pursuant to the terms of this Agreement or
otherwise (collectively, the "Payments") but determined without regard to any
additional payments required under this paragraph 6(b), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, the Executive shall be entitled to receive an additional payment (the
"Gross-Up Payment") in an amount equal to (i) the amount of the excise tax
imposed on the Executive in respect of the Payments (the "Excise Tax") plus (ii)
all federal, state and local income, employment and excise taxes (including any
interest or penalties imposed with respect to such taxes) imposed on the
Executive in respect of the Gross-Up Payment, such that after payments of all
such taxes (including any applicable interest or penalties) on the Gross-Up
Payment, the Executive retains a portion of the Gross-Up Payment equal to the
Excise Tax.
7. Successors; Binding Agreement
(a) Arch Chemicals will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of Arch Chemicals, by agreement, in
form and substance satisfactory to the Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same extent that Arch
Chemicals would be required to perform if no such succession had taken place.
Failure of Arch Chemicals to obtain such assumption and agreement prior to the
effectiveness of any such succession will be a breach of this Agreement and
entitle the Executive to compensation from Arch Chemicals in the same amount and
on the same terms as the Executive would be entitled to hereunder had a
Termination occurred on the succession date. As used in this Agreement, "Arch
Chemicals" means Arch Chemicals as
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defined in the preamble to this Agreement and any successor to its business or
assets which executes and delivers the agreement provided for in this paragraph
7 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law or otherwise.
(b) This Agreement shall be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
8. Notices. For the purpose of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
If to the Company: Arch Chemicals, Inc.
000 Xxxxxxx 0
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
Attention: Corporate Secretary
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
9. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the Commonwealth
of Virginia (without giving effect to its conflicts of law).
10. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in writing signed by the Executive and Arch Chemicals. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same Agreement.
12. Withholding of Taxes. Arch Chemicals may withhold from any benefits
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
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13. Non-assignability. This Agreement is personal in nature and neither
of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder, except as
provided in paragraph 7 above. Without limiting the foregoing, the Executive's
right to receive payments hereunder shall not be assignable or transferable,
whether by pledge, creation of a security interest or otherwise, other than a
transfer by his or her will or by the laws of descent or distribution, and, in
the event of any attempted assignment or transfer by the Executive contrary to
this paragraph, Arch Chemicals shall have no liability to pay any amount so
attempted to be assigned or transferred.
14. No Employment Right. This Agreement shall not be deemed to confer on
the Executive a right to continued employment with Arch Chemicals.
15. Disputes/Arbitration.
(a) Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration at Arch Chemicals'
corporate headquarters in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction; provided, however, that the Executive shall be
entitled to seek specific performance of the Executive's right to be paid during
the pendency of any dispute or controversy arising under or in connection with
this Agreement.
(b) Arch Chemicals shall pay all reasonable legal fees and expenses,
as they become due, which the Executive may incur to enforce this Agreement
through arbitration or otherwise unless the arbitrator determines that Executive
had no reasonable basis for his or her claim. Should Arch Chemicals dispute the
entitlement of the Executive to such fees and expenses, the burden of proof
shall be on Arch Chemicals to establish that the Executive had no reasonable
basis for his or her claim.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year first above set forth.
ARCH CHEMICALS, INC.
By:
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Xxxxxxx X. Xxxxxxxx
Chairman of the Board and
Chief Executive Officer
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Executive
