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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
ARCH CHEMICALS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
[LOGO OF ARCH CHEMICALS]
501 MERRITT 7, NORWALK, CONNECTICUT 06851
March 13, 2001
Dear Fellow Shareholder:
You are cordially invited to attend our 2001 Annual Meeting of Shareholders
at 10:00 a.m. on Thursday, April 26th. The meeting will be held at the
Prudential Center for Learning and Innovation, 32 Weed Avenue, Norwalk,
Connecticut.
You will find information about the meeting in the enclosed Notice and Proxy
Statement.
Please be advised that we have not planned a communications segment or any
multimedia presentations for the 2001 Annual Meeting. The only items of
business on the agenda are the election of two directors and the ratification
of our independent auditors.
Whether or not you plan to attend and regardless of how many shares you own,
please vote your shares by using the telephone or via the Internet or by
signing and dating the enclosed proxy card and mailing the upper half of it in
the enclosed envelope as soon as possible. If you do plan to attend, please so
indicate by checking the appropriate box on the proxy card. Keep the lower
half to be used as your admission card to the meeting.
Sincerely,
/s/ Michael E. Campbell
Michael E. Campbell
Chairman, President and Chief
Executive Officer
YOUR VOTE IS IMPORTANT
You are urged to vote by telephone, via
the Internet or by signing, dating and
promptly mailing your proxy card in the
enclosed envelope.
ARCH CHEMICALS, INC.
Notice of Annual Meeting of Shareholders
Norwalk,
Connecticut
March 13, 2001
The Annual Meeting of Shareholders of ARCH CHEMICALS, INC. will be held at
the Prudential Center for Learning and Innovation, 32 Weed Avenue, Norwalk,
Connecticut, on Thursday, April 26, 2001, at 10:00 a.m., local time, to
consider and act upon the following:
(1) The election of two Directors.
(2) Ratification of the appointment of independent auditors for 2001.
(3) Such other business as may properly come before the meeting or any
adjournment.
The Board of Directors has fixed March 2, 2001 as the record date for
determining shareholders entitled to notice of and to vote at the meeting.
By order of the Board of Directors,
/s/ Sarah A. O'Connor
Sarah A. O'Connor
Secretary
ARCH CHEMICALS, INC.
PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
To be Held April 26, 2001
Who is Arch Chemicals?
Arch Chemicals, Inc. ("Arch" or the "Company") is a NYSE-listed, specialty
chemicals manufacturer. The Company was spun-off by Olin Corporation ("Olin")
as a separate independent public company (the "Spinoff") on February 8, 1999
to the shareholders of Olin. The mailing address of the Company's principal
executive office is 501 Merritt 7, P.O. Box 5204, Norwalk, CT 06856-5204.
When and where will the Annual Meeting be held?
The Annual Meeting of Shareholders of the Company will be held at the
Prudential Center for Learning and Innovation, 32 Weed Avenue, Norwalk,
Connecticut, on Thursday, April 26, 2001, at 10:00 a.m., local time.
Who is asking for my vote and why are you sending me this document?
The Board of Directors of the Company (the "Board") asks that you vote on
the matters listed in the Notice of Annual Meeting of Shareholders. The votes
will be formally counted at the Annual Meeting on Thursday, April 26, 2001, or
if the Annual Meeting is adjourned or postponed, at any later meeting.
We are providing this Proxy Statement and related proxy card to the
shareholders of the Company in connection with the solicitation by the Board
of proxies to be voted at the Annual Meeting. Shares represented by duly
executed proxies in the accompanying form received by the Company prior to the
meeting will be voted at the meeting. We are mailing this Proxy Statement and
the related proxy card to shareholders beginning on or about March 13, 2001.
What am I being asked to vote on?
(1) The election of two Directors.
(2) Ratification of the appointment of independent auditors for 2001.
(3) Such other business as may properly come before the meeting or any
adjournment.
How does the Board recommend I vote on the proposals?
The Board recommends a vote FOR each of the nominees for director identified
in Item 1 and FOR Item 2.
Who is eligible to vote?
All shareholders of record at the close of business on March 2, 2001 (the
"Record Date") are entitled to vote at the Annual Meeting.
How many shares can vote?
At the close of business on the Record Date, the Company had outstanding
22,158,963 shares of common stock, par value $1 per share (the "Common
Stock"). Each shareholder on the Record Date is entitled to one vote for each
full share owned by such shareholder on each of the matters voted on at the
Annual Meeting. Of those shares of Common Stock outstanding, approximately
1,367,107 shares were held in the Arch Common Stock Fund of the Arch
Chemicals, Inc. Contributing Employee Ownership Plan ("CEOP"), all of which
are held by Chase Manhattan Bank as the trustee of the CEOP ("CEOP Trustee").
1
How do I vote?
You may vote in person at the Annual Meeting or by returning your completed
proxy card in the enclosed postage-paid envelope. In addition, shareholders of
record, participants in the CEOP and participants in the Olin Corporation
Contributing Employee Ownership Plan ("Olin CEOP") also have a choice of
voting over the Internet or by using a toll-free telephone number. Please
refer to the proxy card for further information on how to vote electronically.
However, please note that Internet and telephone voting facilities for shares
held of record will close at 11:59 p.m., US Eastern time, on April 25, 2001
and for shares held through the CEOP or Olin CEOP will close at 9:00 a.m., US
Eastern time, on April 25, 2001. If you do vote by telephone or the Internet,
it is not necessary to return your proxy card. Please note that participants
in the CEOP and in the Olin CEOP who do not vote by telephone or Internet must
return their proxy card in the accompanying envelope so that it is received no
later than Noon, US Eastern Time, on April 23, 2001 for their voting
instructions to be followed.
Please be aware that if you vote over the Internet, you may incur costs such
as telephone and Internet access charges for which you will be responsible.
The Internet and telephone voting procedures are designed to authenticate
shareholders and CEOP and Olin CEOP participants by use of a control number,
which appears on the proxy card, and to allow you to confirm that your
instructions have been properly recorded.
The method by which you vote will in no way limit your right to vote at the
meeting if you later decide to attend in person. However, please note that if
your shares are held in the name of a bank, broker or other holder of record,
you must obtain a proxy, executed in your favor, from the shareholder of
record, to be able to vote in person at the meeting. CEOP and Olin CEOP
participants must vote through the CEOP Trustee or trustee of the Olin CEOP
and may not vote their shares held in the CEOP or Olin CEOP in person at the
Annual Meeting.
To what shares does the proxy card apply?
The proxy card supplied by the Company will apply to the number of shares of
Common Stock that you hold of record and, if you are a participant in the CEOP
or a participant in the Olin CEOP, the number of shares held for your account
under the CEOP or Olin CEOP, as the case may be. CEOP and Olin CEOP
participants will not receive a separate voting instruction card. If you do
not execute and return this proxy card or vote electronically, your shares
held of record will not be voted and your shares held in the CEOP will be
voted by the CEOP Trustee in the same proportion as shares of Common Stock for
which the CEOP Trustee has received instructions from other CEOP participants.
Olin CEOP participants should consult with their plan administrator on how
their shares held in the Olin CEOP will or will not be voted if they do not
return a proxy card or otherwise give voting instructions to the trustee of
the Olin CEOP.
Am I a shareholder of record?
If your shares are represented by a stock certificate registered in your
name or if the Company's stock transfer agent is holding your shares in a
"book entry" account under your name, you are a shareholder of record with
respect to those shares so held. If your shares are otherwise owned directly
by a bank, broker, or other holder of record, you are not a shareholder of
record with respect to the shares so held by such bank, broker or other holder
of record.
If I return the proxy card or vote electronically, how will my shares be
voted?
Where a shareholder of record or CEOP participant timely directs in the
proxy (including an electronic vote) a choice regarding any matter that is to
be voted on, that direction will be followed. If no direction is made,
returned proxies of shareholders of record and CEOP participants will have
their registered shares and shares held in the CEOP voted for the election of
directors as set forth below and in favor of the ratification of the
appointment of independent auditors.
As of the date hereof, the Company does not know of any matters other than
those referred to in the accompanying Notice which are to come before the
meeting. If any other matters are properly presented for action, the persons
named in the accompanying form of proxy will vote the proxy in accordance with
their best judgment.
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If I do not return the enclosed proxy card and do not vote electronically, how
will the shares I own of record and through the CEOP or Olin CEOP be voted?
If you do not vote by returning the enclosed proxy card, do not vote
electronically and do not vote at the meeting in person or other proxy, your
shares held of record by you will not be voted at the meeting. CEOP
participants who do not return the proxy card or vote electronically in a
timely manner will have their shares of Common Stock held in the CEOP voted by
the CEOP Trustee in the same proportion as shares of Common Stock for which
the CEOP Trustee has received instructions from other CEOP participants. Olin
CEOP participants should consult with their plan administrator on how their
shares held in the Olin CEOP will or will not be voted if they do not return
their proxy card or otherwise give voting instructions to the trustee of the
Olin CEOP.
What if I own shares of the Company through a bank, broker or other holder of
record or in another company's employee savings plan (other than the CEOP)?
If you hold Common Stock through a bank, broker or other holder of record or
through another company's stock savings plan (other than the CEOP), you will
most likely receive voting instructions from such bank, broker or other holder
or from that plan's administrator. In any case, please follow those
instructions to assure that your shares are voted and represented at the
meeting.
If your shares are owned directly in the name of a bank, broker or other
holder of record, you must obtain a proxy, executed in your favor, from the
shareholder of record, to be able to vote in person at the meeting. CEOP
participants must vote the shares held in the CEOP through the CEOP Trustee.
How are the shares held in The DirectSERVICE(TM) Investment Program voted?
First Chicago Trust Company of New York, a division of EquiServe
("EquiServe"), is the Company's registrar and stock transfer agent. For
holders of Common Stock who participate in The DirectSERVICE(TM) Investment
Program offered by EquiServe, EquiServe will vote any shares of Common Stock
that it holds for the participant's account in accordance with the
participant's electronic vote or with the proxy returned by the participant
covering his or her shares of record. If a DirectSERVICE(TM) participant does
not send in a proxy for shares held of record or otherwise vote
electronically, EquiServe will not vote the shares of such participant held in
such program.
Can I change my vote after I have returned my proxy card or voted over the
telephone or via the Internet?
Yes. Any person who has returned a proxy or voted electronically has the
power to revoke it at any time before it is exercised by submitting a
subsequently dated proxy, by voting again via the Internet or by telephone, by
giving notice in writing to the Corporate Secretary or by voting in person at
the meeting. Please note telephone and Internet voting ends for shares held of
record at 11:59 p.m., US Eastern time, on April 25, 2001 and for shares held
through the CEOP and Olin CEOP at 9:00 a.m., US Eastern time, on April 25,
2001. Please note that participants in the CEOP and in the Olin CEOP who do
not vote by telephone or Internet must return their proxy card in the
accompanying envelope so that EquiServe receives it no later than Noon, US
Eastern time, on April 23, 2001 if their voting instructions are to be
followed. If your shares are held in the name of a bank, broker or other
holder of record, you must obtain a proxy, executed in your favor, from the
shareholder of record to be able to vote in person at the meeting.
What does it mean if I get more than one proxy or voting instruction card?
You will receive one proxy card for each way in which your shares are
registered. If you receive more than one proxy card (other than because you
are a participant in the CEOP, Olin CEOP or a savings plan of another
company), it is because your shares are registered in different names or with
different addresses or are held in different accounts. Please sign and return
each proxy card that you receive to ensure that all your shares are voted. To
enable us to provide better shareholder service, we encourage shareholders to
have all their shares registered in the same name with the same address. You
should contact EquiServe at (800) 519-3111 for instructions on how to change
the way your shares are held if you receive more than one mailing.
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CERTAIN BENEFICIAL OWNERS
Except as indicated below, the Company knows of no person who was the
beneficial owner of more than five percent of Common Stock as of December 31,
2000.
Amount and
Nature of
Beneficial Percent
Name and Address of Beneficial Owner Ownership of Class
- ------------------------------------ ---------- --------
State Street Bank and Trust Company(a)...................... 3,754,302 17.0
225 Franklin Street
Boston, MA 02110
FMR Corp.(b)................................................ 2,262,030 10.2
82 Devonshire Street
Boston, MA 02109
T. Rowe Price Associates, Inc.(c)........................... 2,017,950 9.1
100 East Pratt Street
Baltimore, MD 21202
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(a) State Street Bank and Trust Company ("State Street"), a bank, acting in
various fiduciary capacities, including as CEOP Trustee, has advised the
Company in a Schedule 13G filing that it has sole voting power with
respect to 128,098 shares, shared voting power with respect to 3,612,804
shares, sole dispositive power with respect to 3,754,228 shares and
shared dispositive power with respect to 74 shares. State Street
disclaims beneficial ownership of all such shares. State Street was the
CEOP Trustee on December 31, 2000 but ceased to be CEOP Trustee on March
1, 2001.
(b) The Company has been advised in an amended Schedule 13G filing as follows
with respect to these shares: Fidelity Management & Research Company
("Fidelity") beneficially owns 1,097,080 shares and Fidelity Management
Trust Company ("FMTC") beneficially owns 1,164,950 shares. Both are
subsidiaries of FMR Corp. ("FMR"). Edward C. Johnson 3rd ("Johnson"), who
is the Chairman of FMR, FMR, through its control of Fidelity, and its
Funds each has sole dispositive power with respect to the 1,097,080
shares owned by such Funds. Neither Johnson nor FMR has sole voting power
with respect to the shares owned by the Funds, which power rests with the
Funds' Board of Trustees. Johnson and FMR, through its control of FMTC,
each has sole dispositive power over 1,164,950 shares and sole voting
power over 1,164,950 shares.
(c) T. Rowe Price Associates, Inc., a registered investment adviser, has
advised the Company in an amended Schedule 13G filing that it has sole
voting power with respect to 570,250 of such shares and sole dispositive
power with respect to all the shares. T. Rowe Price Associates, Inc.
expressly disclaims that it is, in fact, the beneficial owner of such
shares.
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ITEM 1--ELECTION OF DIRECTORS
Who are the persons nominated by the Board in this election to serve as
directors?
The Board of Directors is divided into three classes with the term of office
of each class being three years, ending in different years. Messrs. Richard E.
Cavanagh and Michael O. Magdol, whose biographies are shown below, have been
nominated by the Board for election as Class II Directors to serve until the
2004 Annual Meeting of Shareholders and until their successors have been
elected.
CLASS II
NOMINEES FOR THREE YEAR TERMS EXPIRING AT 2004 ANNUAL MEETING
[PHOTO] RICHARD E. CAVANAGH, 54, is President and Chief Executive
Officer and a Trustee of The Conference Board, Inc., a
leading research and business membership organization. He
has held this position since November 1995. Previously, he
was Executive Dean of the John F. Kennedy School of
Government at Harvard University for eight years. Prior to
the position with Harvard, he spent 17 years with McKinsey &
Company, Inc., the international management consulting firm,
where he led the firm's public issues consulting practice.
Mr. Cavanagh is a Trustee of the BlackRock Mutual Funds,
Airplanes Group and Aircraft Finance Trust (AFT), and The
Educational Testing Service; and a director of Fremont Group
and The Guardian Life Insurance Company. He holds a BA
degree from Wesleyan University and an MBA degree from the
Harvard Business School.
[PHOTO] MICHAEL O. MAGDOL, 63, is Vice Chairman of the Board and
Chief Financial Officer of Fiduciary Trust Company
International, a global investment manager for families and
institutions, and has held this position since 1987. Prior
to 1987, he was Executive Vice President and a director of
J. Henry Schroder Bank. He is Chairman and Director of The
Ronald McDonald House of New York, Chairman of the
International Committee of the New York State Bankers
Association and a Trustee of The Lingnan Foundation. He
holds a BSE degree from the University of Pennsylvania.
Who are the other remaining directors and when are their terms scheduled to
end?
CLASS I
DIRECTORS WHOSE TERMS CONTINUE UNTIL 2003 ANNUAL MEETING
JOHN W. JOHNSTONE, JR., 68, retired in April 1996 as
Chairman of the Board of Olin. In 1954, he joined Hooker
Chemicals and Plastics Corporation, where he spent 22 years
in various sales, marketing and management positions of
increasing responsibility, leaving in 1975 to become
President of the Airco Alloys division of Airco, Inc. He
joined Olin in 1979 as Vice President and General Manager of
the Chemicals Group's Industrial Products department. Mr.
Johnstone became a corporate Vice President and President of
the Chemicals Group in 1980, and an Executive Vice President
of Olin in 1983. He was named President of Olin in 1985,
Chief Operating Officer in 1986, Chief Executive Officer in
1987 and Chairman of the Board in 1988. He is a graduate of
Hartwick College, where he received a BA degree in chemistry
and physics and a Doctor of Science (Hon.). He has attended
the Harvard Business School's Advanced Management Program.
Mr. Johnstone is a trustee of Hartwick College and Research
Corporation Technologies, Inc. He is former Chairman of the
Soap and Detergent Association and the Chemical
Manufacturers Association (currently known as the American
Chemistry Council). He is a director of Phoenix Home Life
Mutual Insurance Company, McDermott International, Inc. and
Fortune Brands, Inc.
[PHOTO]
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[PHOTO] JACK D. KUEHLER, 68, retired in 1993 as Vice Chairman of the
Board of International Business Machines Corporation, a
computer manufacturing corporation. He joined IBM in 1958 as
an associate engineer in the San Jose Research Laboratory.
Over the years, he played a significant management role in
many of the corporation's advanced technologies. He served
as Director of the Raleigh Communications Laboratory,
Director of the San Jose Storage Products Laboratory and
President of the Systems Product Division. In 1980, he was
elected an IBM Vice President and named President of the
General Technology Division. He became a member of the IBM
Board in 1986, Executive Vice President in 1987, Vice
Chairman and member of the Executive Committee in 1988 and
President in 1989. He resumed the title of Vice Chairman in
January 1993. He is a member of the National Academy of
Engineering, a fellow of the Institute of Electrical and
Electronics Engineers and a trustee of Santa Clara
University (from which he graduated with a BS degree in
mechanical engineering and an MS degree in electrical
engineering). He is a director of Aetna, Inc., the Parsons
Corporation and Mail.com. Mr. Kuehler holds an honorary
doctorate of science from Clarkson University and an
honorary doctorate of engineering science from Santa Clara
University.
CLASS III
DIRECTORS WHOSE TERMS CONTINUE UNTIL 2002 ANNUAL MEETING
[PHOTO] MICHAEL E. CAMPBELL, 53, is Chairman of the Board, President
and Chief Executive Officer of the Company. Prior to the
Distribution, he was Executive Vice President of Olin and
had global management responsibility for all of Olin's
businesses. Prior to his election as Executive Vice
President, Mr. Campbell served as President of the
Microelectronic Materials Division. He joined Olin in 1978
in the Legal Department, later serving in legal and
administrative positions of increasing responsibility. In
1987, he was elected Olin's Corporate Vice President, Human
Resources. Mr. Campbell is a graduate of the University of
New Hampshire and received a J.D. degree from George
Washington University. He is also a director of Westvaco
Corporation.
[PHOTO]
H. WILLIAM LICHTENBERGER, 65, retired in 2000 as Chairman
and Chief Executive Officer of Praxair, Inc., an industrial
gases company, a position he assumed in 1992 when Praxair
was spun off from Union Carbide Corporation. In 1986,
Mr. Lichtenberger was elected a Vice President of Union
Carbide Corporation and was appointed President of the Union
Carbide Chemicals and Plastics Company, Inc. He was elected
President and Chief Operating Officer and a director of
Union Carbide Corporation in 1990. He resigned as an officer
and director of Union Carbide Corporation upon Praxair's
spin-off. Mr. Lichtenberger is a graduate of the University
of Iowa where he majored in chemical engineering and has a
masters degree in business administration from the State
University of New York, Buffalo. He is a director of
Ingersoll-Rand Company. He was formerly a director of the
National Association of Manufacturers, a director of the
Chemical Manufacturers Association (currently known as the
American Chemistry Council) and a member of The Business
Roundtable.
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JOHN P. SCHAEFER, 66, is President of the Research
Corporation, a foundation, and Chairman of Research
Corporation Technologies, Inc. Previously, he was President
of the University of Arizona (1971-1982) and Professor of
Chemistry at the University where he had been a member of
the faculty since 1960. Before his appointment as President
of the University, he served as head of its Department of
Chemistry and Dean of its College of Liberal Arts. Dr.
Schaefer received his BS degree in chemistry from the
Polytechnic Institute of Brooklyn in 1955 and his Ph.D.
degree from the University of Illinois in 1958. After
postdoctoral studies at the California Institute of
Technology, he taught chemistry at the University of
California (Berkeley). Dr. Schaefer's research interests
have been in the area of synthetic and structural chemistry.
He served on the Board of Governors of the U.S.-Israeli
Binational Science Foundation (1973-1978). He is a director
of Research Corporation and Research Corporation
Technologies, Inc.
[PHOTO]
How will the returned proxies be voted for directors?
If the proxy card is returned and marked with a direction on how to vote
with respect to directors or if a person directs a vote electronically as
provided on the proxy card, that direction will be followed. If an individual
returns a proxy card without a direction on how to vote marked thereon, such
individual's shares of record and shares held in the CEOP, if any, will be
voted for the election of Messrs. Cavanagh and Magdol. Each of the nominees is
a director at the present time. It is not expected that any of the nominees
will be unable to serve as a director, but if any are unable to accept
election, it is intended that shares represented by proxies in the
accompanying form or voted electronically will be voted for the election of
substitute nominees selected by the Board, unless the number of directors is
reduced.
What vote is required to elect the directors?
The election of each nominee as a director requires the affirmative vote of
a plurality of the votes cast in the election. Votes withheld and shares held
in street name ("Broker Shares") that are not voted in the election of
directors will not be included in determining the number of votes cast.
ADDITIONAL INFORMATION REGARDING THE BOARD OF DIRECTORS
What are the committees of the Board? How often did the Board and each
committee meet in 2000?
During 2000, the Board held seven meetings. The average attendance by
directors at meetings of the Board and committees of the Board on which they
served was 94%. Each director attended at least 75% of such meetings.
The current standing committees of the Board are an Audit Committee, a
Compensation Committee and a Corporate Governance Committee.
The Audit Committee advises the Board on internal and external audit matters
affecting the Company, including recommendation of the appointment of
independent auditors of the Company; reviews with such auditors the scope and
results of their examination of the financial statements of the Company;
reviews the Company's financial, regulatory and computer annual audit plans;
reviews reports and audits of the Company's internal audit service provider;
and reviews the presentation of the Company's financial results and monitors
the adequacy of the Company's internal financial controls. The committee also
advises the Board on compliance with the Company's Standards of Ethical
Business Practices, on government and other compliance programs, on corporate
and governmental security matters, monitors major litigation and pending
internal or external special investigations, with a particular interest in the
event there are claims that the Company has acted unethically or unlawfully
and reviews the Company's insurance and risk management process. The committee
also has oversight responsibility for the implementation of the Company's
Responsible Care(R) Codes and for compliance
7
with legal mandates in the environmental, health, safety and other regulatory
areas. The committee also reviews and evaluates the investment and financial
performance of the Company's pension plan, voluntary employee benefit
associations ("VEBAs") and any thrift plan investment funds, reviews and
approves investment policies with respect to the pension plan, VEBAs and any
thrift plan funds, approves the selection of thrift plan investment options,
approves the appointment of pension plan, VEBA and thrift plan trustees and
investment managers and their respective agreements, consults with, and
obtains reports from, the pension plan, VEBA and thrift plan trustees and
other fiduciaries, makes recommendations to the Board for charitable
contributions, annually reviews the contributions, financial condition and
administration of the Arch Chemicals Government Participation Fund, and
reviews, provides advice, and recommends changes, as appropriate, to
Management's programs to maintain and improve shareholder relations. The Audit
Committee currently consists of Messrs. Johnstone, Magdol and Schaefer
(chair). During 2000, three meetings of this committee were held.
The Compensation Committee sets policy, develops and monitors strategies
for, and administers the programs which compensate the Chief Executive Officer
("CEO") and other senior executives. The committee approves the salary plans
for the CEO and certain other senior executives including total direct
compensation opportunity, and the mix of base salary, annual incentive
standard and long term incentive guideline awards. It approves the measures,
goals, objectives, weighting, payout matrices and actual payouts and certifies
performance for and administers the incentive compensation plans. The
committee also administers the 1999 Long Term Incentive Plan, issues an annual
Report on Executive Compensation that appears in the Proxy Statement, approves
Executive and Change in Control Agreements, approves and adopts new qualified
and non-qualified pension plans, adopts amendments thereto and recommends to
the Board changes in administration of said plans, approves terminations of
qualified and non-qualified pension plans, approves the interest rate for
deferred compensation arrangements, administers the Senior Executive Pension
Plan, makes recommendations to the Board on any other matters pertaining to
the pension, CEOP and other plans which the committee deems appropriate and
reviews plans for management development and succession. The committee also
advises the Board on the remuneration for members of the Board. The
Compensation Committee currently consists of Messrs. Cavanagh, Kuehler and
Lichtenberger (chair). During 2000, four meetings of this committee were held.
The Corporate Governance Committee assists the Board in fulfilling its
responsibility to the Company's shareholders relating to the selection and
nomination of Directors, makes recommendations to the Board regarding the
selection of the CEO, reviews the nominees for other offices of the Company,
periodically reviews corporate governance trends, issues and best practices
and makes recommendations to the Board regarding the adoption of best
practices most appropriate for the governance of the affairs of the Board,
recommends to the Board a slate of nominees to be proposed for election to the
Board by shareholders at annual meetings and at other appropriate times,
recommends individuals to fill any vacancies created on the Board, makes
recommendations to the Board regarding the size and composition of the Board,
the particular qualifications and experience that might be sought in Board
nominees, assesses whether the qualifications and experience of candidates for
nomination and renomination to the Board meet the then current needs of the
Board, seeks out possible candidates for nomination and considers suggestions
by shareholders, Management, employees and others for candidates for
nomination and renomination as Directors, reviews and makes recommendations to
the Board regarding the composition, duties and responsibilities of various
Board committees from time to time as may be appropriate, reviews and advises
the Board on such matters as protection against liability and indemnification,
and assesses and reports annually to the Board on the performance of the Board
itself as a whole. The Corporate Governance Committee currently consists of
Messrs. Cavanagh, Johnstone (chair), Kuehler, Lichtenberger, Magdol and
Schaefer. During 2000, one meeting of this committee was held.
The Corporate Governance Committee will consider candidates recommended by
shareholders for election as directors at future annual meetings.
Recommendations must be in writing and submitted to the Corporate Secretary of
the Company by December 1, accompanied by the written consent of the candidate
along with the information required for director nominations as set forth in
the Company's Bylaws.
8
Report of the Audit Committee
The Audit Committee is charged with several responsibilities, including the
responsibility of independently protecting shareholder interests by ensuring
for the Board that proper financial accounting principles are being followed,
that the total financial and regulatory audit coverage of the Company and its
affiliates is satisfactory and that an adequate system of internal controls
has been implemented in the Corporation and is being effectively administered.
The Audit Committee is also responsible for ensuring that the Company
endeavors to comply with all laws applicable to the conduct of its business
and that it conducts its business in an ethical manner.
The Committee meets with management periodically to consider the adequacy of
the Company's internal controls and the objectivity of its financial
reporting. It discusses these matters with the Company's independent auditors
and members of the internal audit team, which the Company has outsourced, as
well as with appropriate Company financial personnel.
It regularly meets privately with both the independent auditors and the
outsourced internal auditors, each of whom has unrestricted access to the
Committee.
The Committee also recommends to the Board the appointment of the
independent auditors and reviews periodically their performance and
independence.
The Directors who serve on the committee are all "Independent" for purposes
of the New York Stock Exchange listing standards. Thus, the Board of Directors
has determined that no Audit Committee member has a relationship to the
Company that may interfere with our independence from the Company and its
management.
The Board has adopted a written charter setting out the audit related
functions the committee is to perform. A copy of that charter is attached to
this proxy statement as Appendix A.
Management has primary responsibility for the Company's financial statements
and the overall reporting process, including the Company's system of internal
controls.
The independent auditors audit the annual financial statements prepared by
management, express an opinion as to whether those financial statements fairly
present the financial position, results of operations and cash flows of the
Company in conformity with generally accepted accounting principles and
discuss with us any issues they believe should be raised with the Committee.
The Committee reviewed the Company's audited financial statements for the
year ended December 31, 2000 and met with both management and KPMG LLP
("KPMG"), the Company's independent auditors, to discuss those financial
statements. Management has represented to the Committee that the financial
statements were prepared in accordance with generally accepted accounting
principles.
The Committee has received from and discussed with KPMG the written
disclosure and the letter required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees). These items relate to
that firm's independence from the Company. We also discussed with KPMG any
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
Based on these reviews and discussions, the Committee recommended to the
Board that the Company's audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2000.
John P. Schaefer, Chair
John W. Johnstone, Jr.
Michael O. Magdol
9
What are the directors paid for their services?
Generally speaking, the Stock Plan for Nonemployee Directors (the "Director
Plan") (i) provides for the granting annually, at the election of the Board,
of a number of shares of Common Stock, options to purchase shares of Common
Stock, performance shares or a combination of the foregoing (as determined by
the Board) to each Nonemployee Director and, in the case of a grant of shares
of Common Stock, the deferral of the payment of such shares until after such
director ceases to be a member of the Board, (ii) permits the Board to
determine if all or part of the annual retainer shall be paid in shares of
Common Stock, (iii) permits such director, subject to the approval of the
Board, to elect to receive his or her meeting fees in the form of shares of
Common Stock in lieu of cash, (iv) permits such director, subject to the
approval of the Board, to elect to receive in the form of shares of Common
Stock the amount by which the annual retainer exceeds the amount payable in
shares of Common Stock ("Excess Retainer") in lieu of cash for such excess and
(v) permits such director, subject to the approval of the Board, to elect to
defer any meeting fees and Excess Retainer paid in cash and any shares to be
delivered under the Directors Plan. Interest on deferred cash and dividends on
deferred shares are paid to the Nonemployee Director unless the director,
subject to the approval of the Board, elects to defer such amounts in which
case interest is credited quarterly and dividend equivalents are reinvested in
phantom shares of Common Stock on the dividend payment date. Deferred shares
are paid out in shares of Common Stock. Performance shares vest and are paid
out, unless deferred by the director, upon the satisfaction of performance
goals established by the Compensation Committee. Deferred accounts under the
Directors Plan are paid out if there is a "Change in Control" as defined in
such plan.
In 2000 and 2001, each Nonemployee Director received or was credited with
1,800 shares of Common Stock and $16,500 in cash as the annual retainer under
the Directors Plan. In addition, the Directors were granted 3,600 stock
options on January 3, 2000 with an exercise price of $19.85 per share, and
3,600 stock options on January 2, 2001 with an exercise price of $18.04 per
share, which in each case was the fair market value of the Common Stock on the
grant date. Such options are currently exercisable and have a ten-year term.
If director meetings exceed eight meetings in a calendar year, each
Nonemployee Director will receive a $1,500 meeting fee for each Board meeting
attended in excess of eight meetings. Each Committee chair received a $5,000
annual committee meeting fee in 2000 and will receive such fee in 2001. The
shares, cash retainer and fees may be deferred by the Director as provided in
the Directors Plan.
Directors participate in the Arch charitable giving program with a 100%
match for gifts up to $2,500 to eligible charities. Directors who are not
officers or employees of the Company or one of its subsidiaries are covered
while on Company business under the Company's business travel accident
insurance policy which covers employees of the Company generally. Directors
also are reimbursed during the year for expenses incurred in the performance
of their duties as directors, such as travel expenses.
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
How much stock is beneficially owned by directors and the individuals named in
the Summary Compensation Table?
The following table sets forth the number of shares of Common Stock
beneficially owned by each director and nominee for director, by the
individuals named in the summary compensation table on page 14, and by all
directors and current executive officers of the Company as a group, as
reported to the Company by such persons as of January 15, 2001. Unless
otherwise indicated in the footnotes below, the officers, directors, nominees
and individuals had sole voting and investment power over such shares. Also
included in the table are shares of Common Stock which may be acquired within
60 days.
10
No. of Percent of
Common Shares Class of
Beneficially Common
Name of Beneficial Owner Owned(a,b) Stock(c)
------------------------ ------------- ----------
Michael E. Campbell................................... 101,302 --
Richard E. Cavanagh................................... 12,561 --
Paul J. Craney........................................ 19,990 --
John W. Johnstone, Jr................................. 167,459 --
Jack D. Kuehler....................................... 16,727 --
H. William Lichtenberger.............................. 15,206 --
Michael O. Magdol..................................... 11,940 --
Louis S. Massimo...................................... 19,512 --
Sarah A. O'Connor..................................... 2,824 --
John P. Schaefer...................................... 18,937 --
Charles W. Shaver..................................... 4,087 --
Directors and executive officers as a group, including
those named above
(19 persons)......................................... 433,650 1.93
- --------
(a) Included in this table with respect to officers are shares credited under
the CEOP. Also included in the case of the incumbent directors (other
than Mr. Campbell) are certain shares of Common Stock credited to a
deferred account for such directors pursuant to the arrangements
described above under "What are the directors paid for their services?"
in the amounts of 5,238 for Mr. Cavanagh; 3,384 for Mr. Johnstone; 9,527
for Mr. Kuehler; 7,806 for Mr. Lichtenberger; 4,740 for Mr. Magdol; and
7,548 for Mr. Schaefer. Such shares so credited to these directors have
no voting power.
(b) The amounts shown include shares that may be acquired within 60 days
following January 15, 2001 through the exercise of stock options, as
follows: Mr. Campbell, 85,050; Mr. Cavanagh, 7,200; Mr. Craney, 15,033;
Mr. Johnstone, 114,216; Mr. Kuehler, 7,200; Mr. Lichtenberger, 7,200; Mr.
Magdol, 7,200; Mr. Massimo, 16,435; Ms. O'Connor, 500; Mr. Schaefer,
7,200; and all directors and executive officers as a group, including the
named individuals, 293,635.
(c) Unless otherwise indicated, beneficial ownership of any named individual
does not exceed 1% of the outstanding shares of Common Stock.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of Arch's equity securities, to file reports of ownership and
changes in ownership with the SEC and the New York Stock Exchange. Officers,
directors and greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during the period January 1, 2000 to December 31, 2000 all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with except for
Philippe Gouby, who was inadvertently late in filing a Form 3 in connection
with his becoming subject to Section 16(a) upon his appointment as an officer,
and James LaCasse, a former officer, who was late in reporting a Section 16(b)
exempt payout of restricted stock units for the month of January 2000.
11
EXECUTIVE COMPENSATION
Report of the Compensation Committee on Executive Compensation
Compensation Philosophy
It is the philosophy of the Company to incent and compensate its executives
to maximize shareholder value. This philosophy incorporates the following
principles:
1. Compensation should attract and retain qualified employees and
stimulate their profitable efforts on behalf of the Company;
2. Compensation should be internally equitable and externally
competitive; and
3. Performance metrics should be directly linked to profitability and
shareholder value creation of the Company.
Executive Compensation Program as Administered in 2000
Generally speaking, the Compensation Committee establishes competitive total
compensation opportunities for the CEO and other executive officers that are
targeted to the median of a group of 23 specialty chemical companies (the
"comparator group") that are similar to Arch in terms of size and scope of
operations. An independent consultant provides the Committee with an annual
assessment of Arch's relative position within this comparator group with
respect to operating performance and total compensation including each of the
following components:
. Annual Base Salary
. Annual Incentive Bonus
. Long Term Incentive Award
Together, these three components comprise the total targeted compensation
opportunity determined by targeting the median of the group cited above. Once
the total targeted compensation opportunity is determined for the CEO and
other named executive officers, the Compensation Committee, also with the
advice of an outside consultant, determines the appropriate mix of these three
components, again using the competitive analysis. With the focus on creating
alignment between the compensation program and shareholders' interest, the
emphasis of the Company's executive compensation is on variable compensation
that is at risk for performance.
The objectives of the Company's executive compensation policies are to:
. Unite the Company's management as a team
. Reward enhancement of earnings per share ("EPS") growth and shareholder
value
. Stress at risk variable pay programs with an emphasis on the long term
financial performance
. Insure "line of sight" strategic objectives are clearly articulated and
their achievement appropriately rewarded
Under Section 162(m) of the Internal Revenue Code, publicly traded
corporations generally are not permitted to deduct compensation in excess of
$1 million paid to certain top executives unless the compensation qualifies as
"performance-based compensation." The Company believes it has complied, and in
the future generally intends to comply with the requirements of Section 162(m)
in order to prevent the non-deductibility of executive compensation wherever
possible. The Company will, however, weigh the benefits of compliance with
Section 162(m) against the potential burdens, and reserves the right to pay
compensation that may not be fully deductible if it determines that it is in
the Company's best interest to do so. In this regard, it is the Company's
expectation that compensation under applicable incentive programs will
normally be performance-based compensation and thus qualify for deductibility
under Section 162(m).
12
Annual Base Salary
Effective January 1, 2000, the CEO's base salary was set at $600,000.
Factors considered by the Committee in setting his 2000 salary included
analyses of the comparator group and targeting our CEO's base salary to below
the median of the comparator group. However, the CEO's base salary was
targeted to be below the median of the comparator group primarily to reflect
increased emphasis on variable pay and to a lesser degree to address the CEO's
relatively short tenure in this position.
Also, effective January 1, 2000, base salary adjustments were made for the
other named executive officers. These salary adjustments utilized the same
comparative methodology cited above.
Annual Incentive Bonus
Incentive bonuses for Arch named executive officers were determined by a
comparison of pre-established 2000 targets for EPS, profit margin performance,
return on total assets and in the case of one such officer, business unit
profitability, with actual 2000 financial performance for these measures and
in the case of another such officer, supply chain savings. The financial
measures were weighted 80% with the remaining 20% applied to achieving
personal strategic objectives. In addition, several named executive officers,
including the CEO, had included in their eligible opportunity bonus amount a
portion of their Olin EVA bonus bank balances that were transferred over to
the Company from Olin Corporation in the Spinoff. These balances at Olin
represented deferred bonus amounts that were "at risk" for future years.
Participants who had positive bank balances in the Olin EVA Bonus Plan who
became Arch employees have one-third of the bank balance at risk for each of
the years 1999, 2000 and 2001. This "at risk" bank portion will be paid only
if the annual incentive bonus plan produces a payout; however, for 2000, any
portion of such one-third amount that is unearned in 2000 will be carried over
to 2001 for payout consideration based on accomplishment of 2001 targets.
The CEO's bonus was determined under the Senior Management Incentive
Compensation Plan in accordance with the specified performance metrics and
weightings using the three financial performance measures outlined above. This
resulted in a 0% payout for the CEO under such plan. For 2000, the CEO's total
bonus payout was $150,000. This consisted of a zero payout from the Company's
Senior Management Incentive Compensation Plan, and $150,000, which represented
an additional payment regarding the CEO's performance with respect to the
CEO's accomplishment of strategic, non-financial objectives that were
established earlier in the year such as health, safety and environmental
performance, improvements in business processes, and human resource
development. In addition, for 2000, a major goal of the CEO was accomplishing
the acquisition of Hickson International PLC in the summer of 2000 and the
acquisition of Brooks Industries' personal care intermediates business in
November 2000 and the sale of Superior Pool Products in July 2000. The
Committee considered performance in this area to be highly significant in
determining the level of the award.
Long Term Incentive Award
As indicated earlier, the Committee, with the advice of its independent
consultant, established target values for all three components of
compensation, including the Long Term Incentive Plan award. This first grant
made to executives is intended to deliver three years of target value and was
made in the form of stock options and performance share units in 1999. With a
view consistent with aligning Arch's senior executives with the interests of
shareholders, the award of performance shares was designed to recognize and
reward cumulative EPS growth over a three-year performance period ending with
2001 for the named executive officers. The performance share units can be
earned at the end of the three-year performance cycle provided that the EPS
growth targets are achieved during that period. In addition, stock options
were awarded that will be of value only through share
13
price appreciation. The stock options were granted at the fair market value of
Arch shares on February 9, 1999, become exercisable on February 9, 2002 and
have a ten-year term.
H. William Lichtenberger, Chair
Richard E. Cavanagh
Jack D. Kuehler
January 25, 2001
The following table shows for the Chief Executive Officer and the other four
most highly compensated executive officers of Arch (collectively, the "named
executive officers") cash compensation for the fiscal years 1998-2000. Amounts
shown in the table and related footnotes include payments by Olin for services
to Olin in the periods prior to the Spinoff.
Summary Compensation Table
Long Term
Annual Compensation Compensation
-------------------------------- ---------------------
Awards Payouts
---------- ----------
Other All
Name and Principal Annual Securities Other
Position as of Compen- Underlying LTIP Compen-
December 31, 2000 Year Salary Bonus sation(a) Options(b) Payouts(c) sation(d)
------------------ ---- -------- -------- --------- ---------- ---------- ---------
Michael E. Campbell..... 2000 $600,000 $150,000 $30,316 0 $ 0 $41,575
Chairman, President &
Chief Executive 1999 539,591 401,306 26,356 200,000 81,579 30,808
Officer 1998 425,004 152,412 17,619 50,000 207,140 32,168
Louis S. Massimo........ 2000 300,000 60,000 0 0 0 14,849
Vice President & 1999 268,754 122,721 0 50,000 0 12,674
Chief Financial Officer 1998 200,004 53,639 0 12,500 0 12,214
Paul J. Craney.......... 2000 235,008 99,448 0 0 0 12,550
Vice President and
General Manager, 1999 209,167 109,546 0 30,000 10,729 11,717
Treatment 1998 196,010 98,926 469 7,500 44,769 18,294
Charles W. Shaver(e).... 2000 225,000 100,000 0 0 0 18,866
Vice President &
General Manager, 1999 134,875 125,000 0 30,000 0 87,286
Performance 1998 -- -- -- -- -- --
Sarah A. O'Connor....... 2000 250,008 50,000 0 0 0 10,061
Vice President, General
Counsel & 1999 194,337 83,218 0 40,000 0 7,825
Secretary 1998 130,164 18,079 0 1,000 0 858
- --------
(a) Includes tax gross-ups paid for imputed income on use of company-provided
automobiles or automobile allowance and an outside personal financial
advisor. Amounts shown for 1998 also include dividend equivalents on
outstanding Olin performance share units paid at the same rate as
dividends paid on Olin common stock.
(b) Amounts shown for 1998 represent stock options to buy Olin common stock
and do not represent options to acquire Arch Common Stock. These Olin
options were granted prior to the Spinoff while the named individual was
an Olin employee. Outstanding Olin options at the time of the Spinoff were
equitably adjusted to create a new Olin option and new Arch stock option.
(c) Amounts include payouts of Olin performance share units in the form of
Olin common stock made prior to the Spinoff.
(d) Amounts reported in this column for 2000 consist of the following items:
Value of
Split-Dollar
CEOP Supplemental Term Life Life Insurance
Match CEOP(1) Insurance(2) Premiums(3)
------ ------------ ------------ --------------
M. E. Campbell............... $5,625 $14,129 $3,145 $18,676
L. S. Massimo................ 5,657 4,284 1,370 3,538
P. J. Craney................. 5,632 1,889 -- 5,029
C. W. Shaver................. 4,944 942 -- 1,853
S. A. O'Connor............... 5,512 2,666 -- 1,883
14
--------
(1) The Supplemental CEOP permits participants in the CEOP to make
contributions, and the Company to match the same, in amounts permitted
by the CEOP but which would otherwise be in excess of those permitted
by certain Internal Revenue Service limitations. The 2000 contributions
and Company matching amounts made after the Spinoff were invested in an
Arch phantom stock account under this plan.
(2) Under Arch's key executive insurance program, additional life insurance
is provided and monthly payments are made to the spouse and dependent
children of deceased participants.
(3) The amount of the premium shown represents the full dollar amount of
the premium the Company paid in 2000 for the whole life insurance and
to fund the retiree death benefit.
The amount for Mr. Shaver also includes $11,127 of relocation expenses
(including tax gross ups) made under Arch's relocation policy and relating
to his hiring and move to Connecticut.
(e) Mr. Shaver became an employee of the Company in April 1999.
How many 1999 Long Term Incentive Plan ("Long Term Plan") awards were granted
in 2000 as part of 2000 compensation to the individuals named in the Summary
Compensation Table?
No employee stock options and no performance share units were granted by the
Company from January 1, 2000 through December 31, 2000 to the individuals
named in the summary compensation table on page 14.
How many Arch stock options were exercised in 2000 by the individuals named in
the Summary Compensation Table and what is the value of the unexercised ones?
The following table sets forth as to the individuals named in the summary
compensation table on page 14, information regarding options exercised during
2000 and the value of in-the-money outstanding options at the end of 2000.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-end Option
Values
Shares Number of Securities Aggregate Value of
Acquired Value Underlying Unexercised Unexercised, In-the-Money
Name on Exercise Realized Options at 12/31/00 Options at 12/31/00(a)
- ---- ----------- -------- ------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
M.E. Campbell........... 2,298 $1,448 76,718 208,332 $10,551 $ 0
L.S. Massimo............ 0 -- 13,192 54,166 0 0
P.J. Craney............. 0 -- 13,785 31,248 0 0
C.W. Shaver............. 0 -- 0 30,000 0 0
S.A. O'Connor........... 0 -- 334 40,166 0 0
- --------
(a) Value was computed as the difference between the exercise price and the
$17.75 per share closing price of Arch Common Stock on December 31, 2000,
as reported on the consolidated transaction reporting system relating to
New York Stock Exchange issues.
15
Comparison of 23 Month Cumulative Total Return Among Arch Chemicals, Inc.,
the S & P 500 Index and the S & P Chemicals (Specialty) Index
The graph below compares the cumulative total shareholder return of the
Common Stock to the Standard & Poor's 500 Index and to the Standard & Poor's
Chemicals (Specialty) Index for the period from February 9, 1999, the day
shares of Common Stock began "regular way" trading on the New York Stock
Exchange, to December 31, 2000, the last trading day of the Company's fiscal
year. The graph assumes that the value of the investment in the Common Stock
and each index was $100 at February 9, 1999 and that all dividends were
reinvested.
[BAR CHART]
ARCH CHEMICALS, INC. S&P 500 S&P CHEMICALS (SPECIALTY)
2/9/99 100 100 100
3/99 89.04 100.77 100.18
6/99 130.35 107.87 132.45
9/99 87.61 101.14 107.4
12/99 114.78 116.19 111.61
3/00 110.8 118.85 96.93
6/00 122.49 115.69 95.21
9/00 103.35 114.57 84.21
12/00 101.62 105.61 99.28
Do the named executive officers have employment or change in control
agreements?
Each of the five executive officers named in the summary compensation table
has an Executive Agreement with the Company which provides, among other
things, that in the event of a covered termination of employment (which could
include, among other things, termination of employment by the Company (other
than for cause) and termination at the election of the individual to leave the
Company under certain circumstances), the individual will receive a lump sum
severance payment from the Company equal to 12 months' base pay plus the
greater of (a) the average incentive compensation award paid by the Company
during the three years preceding the termination or (b) the then standard
annual incentive compensation award, less any amounts payable under existing
severance or disability plans of the Company. In the event that a "Change in
Control" of the Company occurs, and there is a covered termination, the
individual will receive (i) three times the severance payment and (ii) another
payment equal to three times the higher of the individual's long term
incentive target at the time of termination or immediately prior to the Change
in Control. Pension credit and insurance coverage would be afforded for the
period reflected in the severance payment, and in certain cases, insurance
coverage will be extended beyond such period. The agreements also provide for
certain outplacement services. A "Change in Control" would occur if the
Company ceases to be publicly owned; 20% or more of its voting stock is
acquired by others (other than the Company, a Subsidiary or a Company employee
benefit plan); the incumbent Directors
16
and their designated successors cease over a two-year period to constitute a
majority of the Board; all or substantially all of the Company's business is
disposed of in a transaction in which the Company is not the surviving
corporation or the Company combines with another company and is the surviving
corporation (unless the Company's shareholders following the transaction own
more than 50% of the voting stock or other ownership interest of the surviving
entity or combined company); or the shareholders of the Company approve a sale
of all or substantially all the Company's assets or a liquidation or
dissolution of the Company. Each agreement provides that the individual agrees
to remain in the Company's employ for six months after a "Potential Change in
Control" of the Company has occurred. The agreements provide that payments
made thereunder or under any change in control provision of the Company's
compensation or benefit plan which are subject to "excess parachute payment"
tax will be increased so that the individual will receive a net payment equal
to that which would have been received if such tax did not apply. Certain of
the Company's benefit and compensation plans also contain "change-in-control"
provisions.
What are the retirement income benefits provided to the named executive
officers?
The Company has a tax-qualified, defined benefit pension plan for Company
employees ("Tax Qualified Pension Plan") that provides benefits based on
service with Olin and with the Company. The Company became liable for the
payment of all pension plan benefits accrued by Company employees prior to and
following the Spinoff who ceased to be Company employees after the Spinoff.
Olin transferred assets to the Company's pension plan and the amount of the
assets were sufficient to comply with Section 414(l) of the Internal Revenue
Code of 1986, as amended.
The Tax Qualified Pension Plan, together with a supplementary nonqualified
plan (collectively, the "Company Pension Plan"), provide for fixed benefits
upon retirement. The normal retirement age is 65, but early retirement is
available after attainment of age 55 with at least 10 years of service at a
reduced percentage of the normal retirement allowance (100% is payable if
early retirement is at age 62 or older). Directors who are not also employees
of the Company are not eligible to participate in the Company Pension Plan.
The Tax Qualified Pension Plan is a tax-qualified plan, and benefits are
payable only with respect to compensation that is not deferred under a
nonqualified plan and that does not exceed certain annual IRS imposed limits.
Under the supplementary plan mentioned above, the Company pays a supplemental
pension, based on the formula described below, on compensation deferred to
nonqualified plans (including deferred incentive compensation). Also under the
supplementary plan, the Company will pay employees affected by the limitations
imposed by the Internal Revenue Code on qualified plans a supplemental pension
in an annual amount equal to the reduction in pensions resulting from such
limitations.
"Compensation" for purposes of the Company Pension Plan represents average
cash compensation per year (salary and bonus shown in the summary compensation
table on page 14), including deferred compensation, received for the highest
three years during the ten years up to and including the year in which an
employee retires, including compensation with Olin. The normal retirement
allowance is 1.5% of "Compensation" as so defined, multiplied by the number of
years of benefit service, reduced by an amount of the employee's primary
Social Security benefit not to exceed 50% of such Social Security benefit.
Years of benefit service shall also include benefit service with Olin.
Under the Company's Senior Executive Pension Plan (the "Senior Plan"), which
is a second nonqualified pension plan, the Company pays retirement benefits to
certain senior executives upon their retirement after age 55, which benefits
are reduced if retirement is prior to age 62. Under the Senior Plan, the
maximum benefit will be 50% of "Compensation" (as defined above), reduced by
payments from the Company Pension Plan, any other Olin or Company pension,
pension benefits from other employers, and certain Social Security benefits.
Subject to the above limitations, benefits under the Senior Plan will accrue
at the rate of 3% for each year of service that a senior executive is eligible
to participate in the Senior Plan. In all cases benefits payable under the
Senior Plan are reduced by (i) annual retirement benefits payable under the
Company Pension Plan, (ii) all qualified and non-qualified deferred
compensation plans of previous and subsequent employers and (iii) 50% of the
employee's
17
primary Social Security benefit. The Senior Plan also provides benefits to the
executive's surviving spouse generally equal to 50% of the executive's
benefits. The Compensation Committee may remove a participant from the Senior
Plan for cause as defined in such plan, and no payments will be made if the
participant voluntarily terminates employment without the committee's consent.
The Tax Qualified Pension Plan provides that if, within three years
following a "Change in Control" of the Company, any corporate action is taken
or filing made in contemplation of, among other things, a plan termination or
merger or other transfer of assets or liabilities of the plan, and such
termination, merger or other event thereafter takes place, plan benefits would
automatically be increased for affected non-collectively bargained
participants (and retired participants) to absorb any plan surplus.
Each of the Senior Plan and the supplementary plan mentioned above provides
that in the event of a "Change in Control," the Company will pay each
participant a lump-sum amount sufficient to purchase an annuity which
(together with any monthly payment provided under trust arrangements or other
annuities established or purchased by the Company to make payments under such
plan) will provide the participant with the same monthly after-tax benefit as
the participant would have received under the plan, based on benefits accrued
thereunder to the date of the "Change in Control." The Executive Agreements
described above provide that an executive officer who is less than age 55 at
the time of a "Change in Control" will, for purposes of calculating the above
lump-sum payment under the Senior Plan, be treated as if he had retired at age
55, with the lump-sum payment being calculated on the basis of service to the
date of the "Change in Control."
The following table shows the maximum combined amounts payable annually on
normal retirement under the Company Pension Plan and Senior Plan. Such amounts
will be reduced by Social Security benefits and the other offsets described
above.
Pension Plan Table
Years of Service
-----------------------------------------------------------------------
Remuneration 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
- ------------ -------- -------- -------- -------- -------- -------- -------- --------
$ 300,000 $ 45,000 $ 90,000 $135,000 $150,000 $150,000 $150,000 $157,500 $180,000
400,000 60,000 120,000 180,000 200,000 200,000 200,000 210,000 240,000
500,000 75,000 150,000 225,000 250,000 250,000 250,000 262,500 300,000
600,000 90,000 180,000 270,000 300,000 300,000 300,000 315,000 360,000
700,000 105,000 210,000 315,000 350,000 350,000 350,000 367,500 420,000
800,000 120,000 240,000 360,000 400,000 400,000 400,000 420,000 480,000
900,000 135,000 270,000 405,000 450,000 450,000 450,000 472,500 540,000
1,000,000 150,000 300,000 450,000 500,000 500,000 500,000 525,000 600,000
1,100,000 165,000 330,000 495,000 550,000 550,000 550,000 577,500 660,000
1,200,000 180,000 360,000 540,000 600,000 600,000 600,000 630,000 720,000
1,300,000 195,000 390,000 585,000 650,000 650,000 650,000 682,500 780,000
Credited years of service for the executive officers named in the summary
compensation table on page 14 as of December 31, 2000 are as follows: Mr.
Campbell, 22.6 years (13.3 years under the Senior Plan); Mr. Craney, 30.6
years (1.3 years under the Senior Plan); Mr. Massimo, 6.1 years (4.0 years
under the Senior Plan); Ms. O'Connor, 11.3 years (1.9 years under the Senior
Plan); and Mr. Shaver, 1.7 years (0 years under the Senior Plan).
Does the Company have a compensation deferral program?
Under the Company's compensation plans and arrangements, all participants
therein, including directors, may defer payment of salaries, director
compensation and incentive compensation to cash and Arch phantom stock
accounts.
18
ITEM 2--RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of KPMG LLP ("KPMG") as
independent auditors of the Company for the year 2001. The appointment of this
firm was recommended to the Board by its Audit Committee.
Why are you asking for the shareholders to ratify the auditors?
The submission of this matter to shareholders at the Annual Meeting is not
required by law or by the Bylaws. The Board of Directors of the Company is,
nevertheless, submitting it to the shareholders to ascertain their views. If
this appointment is not ratified at the Annual Meeting, the Board of Directors
intends to reconsider its appointment of KPMG as independent auditors.
A representative of KPMG is expected to be present at the Annual Meeting and
will have an opportunity to make a statement if he or she desires to do so,
and to respond to appropriate questions.
What were 2000 KPMG audit fees?
Audit Fees
Fees for the fiscal year 2000 audit, including review of applicable SEC
filings, were $939,000.
Financial Information Systems Design and Implementation Fees
No fees were incurred with KPMG for financial information systems design and
implementation in 2000.
All Other Fees
Aggregate fees for all other services rendered by KPMG for the 2000 fiscal
year were $1,502,000. These fees included tax services, internal audit
assistance, customs fees and other consulting and due diligence assistance.
The Audit Committee has considered whether the provision of services
described under All Other Fees is compatible with maintaining KPMG's
independence.
What vote is required to ratify the auditors?
The ratification of the appointment of independent auditors for 2001
requires that the votes cast in favor of the ratification exceed the votes
cast opposing such ratification. Abstentions and Broker Shares that are not
voted will not be included in determining the number of votes cast.
The Board of Directors recommends a vote FOR the ratification of the
appointment of KPMG LLP as the Company's independent auditors for 2001.
MISCELLANEOUS
Who will pay for this solicitation of proxies?
The Company will pay the entire expense of this solicitation of proxies.
Georgeson Shareholder Communications Inc., New York, New York, will solicit
proxies by personal interview, mail, telephone and telegram, and will request
brokerage houses and other custodians, nominees and fiduciaries to forward
soliciting material to the beneficial owners of the Common Stock held of
record by such persons. The Company will pay Georgeson Shareholder
Communications Inc. a fee of $9,500 covering its services and will reimburse
Georgeson Shareholder Communications Inc. for payments made to brokers and
other nominees for their expenses in forwarding soliciting material. In
addition, proxies may be solicited by personal interview, telephone, mail and
telegram by directors, officers and employees of the Company.
19
When must a shareholder submit a proposal for the next annual meeting?
Shareholders who intend to present proposals for consideration at the 2002
Annual Meeting of Shareholders and who wish to have their proposals included
in the Company's proxy statement and proxy card for that meeting, must be
certain that their proposals are received by the Company at its principal
executive offices on or before November 13, 2001. Proposals should be sent to
the Corporate Secretary, 501 Merritt 7, Norwalk, Connecticut 06851. All
proposals must also comply with the applicable requirements of the Federal
securities laws in order to be included in the Company's proxy statement and
proxy card for the 2002 Annual Meeting. In addition, in order for any
shareholder proposal to be presented during next year's annual meeting,
written notice must be received by the Company at its headquarters on or after
November 13, 2001 and on or before December 13, 2001 as provided in the
Company's Bylaws, and shall contain such information as required under such
Bylaws. You may contact the Company's Corporate Secretary at the address
mentioned above for a copy of the relevant Bylaw provisions regarding the
requirements for making shareholder proposals.
By order of the Board of Directors,
Sarah A. O'Connor
Secretary
Dated: March 13, 2001
20
Appendix A
ARCH CHEMICALS, INC.
AUDIT COMMITTEE
CHARTER
Effective April 27, 2000
Membership
The Audit Committee of the Board (the "Committee") will consist of three or
more Directors all of whom are independent outside Directors as defined in the
Principles of Corporate Governance. In addition, the membership of the Audit
Committee shall comply with New York Stock Exchange rules regarding financial
literacy, independence and financial management experience (Rule 303.01(B)(2))
to the extent required by such rules. The Chair will be rotated among
Committee members periodically at the discretion of the Board of Directors.
The immediate past Chair will continue serving as a member of the Committee
for at least one year to ensure an orderly transition.
Function
The Audit Committee is charged with the responsibility of independently
protecting shareholder interests by ensuring for the Board that proper
financial accounting principles are being followed, that the total financial
and regulatory audit coverage of the Corporation and its affiliates is
satisfactory, that adequate data center safeguards and security exists, that
compliance with established environmental, health and safety procedures and
regulations is maintained, and that an adequate system of internal controls
has been implemented in the Corporation and is being effectively administered.
The Audit Committee is also responsible for ensuring that the Corporation
endeavors to comply with all laws applicable to the conduct of its business
and that it conducts its business in an ethical manner. In carrying out its
function, the Committee may use both internal and external resources and
advisors as it deems appropriate.
The outside auditor of the Corporation is ultimately accountable to the
Board of Directors and the Audit Committee. The Audit Committee and the Board
of Directors shall have the ultimate authority and responsibility to select,
evaluate and, if appropriate, replace the outside auditor. If the Board elects
to obtain shareholder approval of the outside auditor, the Board of Directors
shall have ultimate authority and responsibility to nominate the outside
auditor to be proposed for such shareholder approval in the proxy statement.
The Audit Committee shall ensure that the outside auditor submits on a
periodic basis to the Audit Committee a formal written statement delineating
all relationships between the auditor and the Corporation. The Audit Committee
is responsible for actively engaging in a dialogue with the outside auditor
with respect to any disclosed relationships or services that may impact the
objectivity and independence of the outside auditor and for recommending that
the Board of Directors take appropriate action in response to the outside
auditor's report to satisfy itself of the outside auditor's independence.
Duties and Responsibilities
The duties and responsibilities of the Audit Committee will be to:
(a) advise the Board on all internal and external audit matters affecting
the Corporation;
(b) recommend the appointment of independent auditors and approve the
terms and conditions of their engagement;
(c) review the Corporation's financial, regulatory and computer annual
audit plans;
(d) review with Management the appointment and/or replacement of the
senior internal financial and computer auditing executive and senior
internal regulatory auditing executive or outside audit provider of these
services;
21
(e) review with the independent auditors the scope and results of their
examination of the Corporation's financial statements, including any
qualification in the external auditor's opinion, any related management
letter, and management's responses to any external auditor recommendation;
(f) review activity and special reports of the Corporation's internal
audit provider and serve as a channel of communication between the internal
financial and computer auditing service provider, the internal regulatory
auditing service provider and the Board;
(g) review the presentation of the Corporation's financial results and
monitor the adequacy of the Corporation's internal financial controls to
provide reasonable assurance that the financial statements are presented
fairly and in conformity with generally accepted accounting principles;
(h) advise the Board on compliance, or material noncompliance, with the
Arch Chemicals Standards of Ethical Business Practices, the implementation
of the Corporation's Ethics Action Plan and government and other legal
compliance programs;
(i) oversee the ethics program and review, provide advice, and recommend
changes, as appropriate, to Management's programs to maintain and improve
community relations;
(j) advise the Board on corporate and governmental security matters;
(k) monitor major litigation and pending internal or external special
investigations, with a particular interest in matters where there are
claims that the Corporation has acted unethically or unlawfully;
(l) review the Corporation's litigation management process;
(m) review the Corporation's insurance and risk management process;
(n) monitor activities and results of environmental, health and safety
and other regulatory audits;
(o) oversee Management's implementation of the Corporation's Responsible
Care Codes;
(p) review the audit of the expenses of the Corporation's Senior
Executives and members of the Board of Directors;
(q) monitor activities and results of audits of the computer data center
and systems, including microprocessor systems;
(r) review and evaluate the investment and financial performance of the
Corporation's pension plan, Voluntary Employee Benefit Associations
("VEBAs") and any thrift plan investment funds unless otherwise delegated
by the Committee;
(s) review and approve investment policies with respect to the pension
plan, VEBAs and any thrift plan funds unless otherwise delegated by the
Committee;
(t) approve the selection of thrift plan investment options unless
otherwise delegated by the Committee;
(u) approve the appointment of pension plan, VEBAs and thrift plan
trustees and investment managers and their respective agreements unless
otherwise delegated by the Committee;
(v) consult with, and obtain reports from, the pension plan, VEBAs and
thrift plan trustees and other fiduciaries;
(w) make recommendations to the Board for charitable contributions;
(x) review and evaluate any charitable trust investment performance and
plan;
(y) annually review the contributions, financial condition and
administration of the Arch Chemicals Government Participation Fund; and
(z) review, provide advice, and recommend changes, as appropriate, to
Management's programs to maintain and improve shareholder relations.
22
The Chairman of the Board shall provide the Committee with all of the
resources, both internal and external, which the Committee deems necessary or
advisable to meet its duties and responsibilities and carry out its function.
Procedure
Regular meetings of the Committee will be at such times during the year as
approved by the Committee. Meetings with members of Management and/or with
representatives of independent auditors may be scheduled at the request of the
Committee. Special meetings may be called and held subject to the
Corporation's Bylaws.
The Committee may meet privately with independent auditors and consultants
and shall be free to talk directly and independently with any member of
Management in discharging its responsibilities. The Committee will meet
privately with the independent auditors at least once a year.
The Chair of the Committee will regularly report the Committee's findings,
conclusions and recommendations to the Board of Directors.
23
PRINTED ON RECYCLED PAPER
PROXY
Arch Chemicals, Inc.
This Proxy is Solicited on Behalf of the Board of Directors
of Arch Chemicals, Inc.
The undersigned, having received the Notice of Annual Meeting and Proxy
Statement, hereby (i) appoints John W. Johnstone, Jr., John P. Schaefer and
H. William Lichtenberger, and each of them, proxies with full power of
substitution, for and in the name of the undersigned, to vote all shares of
Common Stock of Arch Chemicals, Inc. owned of record by the undersigned,
and (ii) directs Chase Manhattan Bank, Trustee under the Olin Corporation
Contributing Employee Ownership Plan and Trustee under the Arch Chemicals,
Inc. Contributing Employee Ownership Plan (such plans collectively referred
to as the "CEOP") to vote in person or by proxy all shares of Common Stock
of Arch Chemicals, Inc. allocated to any accounts of the undersigned under
such Plans, and which the undersigned is entitled to vote, in each case of
clause (i) and (ii), on all matters which may come before the 2001 Annual
Meeting of Shareholders to be held at The Prudential Center for Learning
and Innovation, 32 Weed Avenue, Norwalk, Connecticut, on April 26, 2001, at
10:00 a.m., local time, and any adjournments or postponements thereof. The
proxies will vote using the directions on the reverse side of this card. If
no direction is provided, this proxy will be voted as recommended by the
Board of Directors. The proxies, in their discretion, are further
authorized to vote on other matters which may properly come before the 2001
Annual Meeting of Shareholders and any adjournments or postponements
thereof.
---------------------------------------------------------------------------
Comments/Change of Address. Please mark box on reverse side.
---------------------------------------------------------------------------
Please complete and sign the proxy on the reverse side and return it in the
enclosed envelope.
FOLD AND DETACH HERE
You are encouraged to specify your choices by marking the ---------------
appropriate boxes (SEE REVERSE SIDE), but you need not SEE REVERSE
mark any boxes if you wish to vote in accordance with the SIDE
Board of Directors' recommendations. ---------------
It is important that your shares are represented at this meeting, whether or not
you attend the meeting in person. To make sure your shares are represented, we
urge you to complete and mail the proxy card on the reverse side or to use our
telephone or Internet voting system.
FOR TELEPHONE AND INTERNET VOTING INSTRUCTIONS, SEE REVERSE SIDE
(ADMISSION TICKET ON REVERSE)
(Bring the admission ticket with you if attending the meeting)
- --------------------------------------------------------------------------------
Directions to The Prudential Center for Learning and Innovation
via the New England Thruway/Connecticut Turnpike or Merritt Parkway
- --------------------------------------------------------------------------------
New England Thruway/Interstate 95/
Connecticut Turnpike -- Exit 13
From New York
1. Turn right onto the Boston Post Road/Connecticut Avenue (U.S. 1)
2. Proceed .3 mile to Richards Avenue.
3. At the traffic light turn left onto Richards Avenue and continue 1.5 miles
to Fillow Street.
4. At stop sign turn left onto Fillow Street, driving .2 mile to stop sign at
Weed Avenue.
5. Turn right onto Weed Avenue, and continue .3 mile to entrance of the
Prudential Center for Learning and Innovation.
6. The entrance is on the right side of Weed Avenue.
From New Haven-- Exit 13
1. Turn right onto the Boston Post Road/Connecticut Avenue (U.S. 1)
2. Proceed .5 mile to Richards Avenue.
3. Follow directions 3-6 above.
Hutchinson River Parkway/
Merritt Parkway -- Exit 38
From New York
1. Turn right onto New Canaan Avenue/Route 123 and, almost immediately, at
traffic light turn left onto Nursery Street.
2. Continue on Nursery Street for .8 mile, bearing right, until it ends at
Marvin Ridge Road.
3. Turn left onto Marvin Ridge Road, which becomes Weed Avenue.
4. Drive for .7 mile to the entrance of the Prudential Center for Learning and
Innovation.
5. The entrance is on the left side of Weed Avenue.
From New Haven -- Exit 38
1. Turn right onto New Canaan Avenue/Route 123.
2. Proceed .2 mile to traffic light and take right onto Nursery Street.
3. Follow directions 2-5 above.
[ X ] Please mark your 5044
votes as in this
example.
This Proxy when properly signed will be voted in the manner directed herein. If
no direction is made, this proxy will be voted "FOR" all of the Board of
Directors' nominees and "FOR" proposal 2.
- ---------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote for all proposals:
- ---------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Ratification of the [ ] [ ] [ ]
Directors: appointment of KPMG
01. Richard E. Cavanagh LLP as independent
02. Michael O. Magdol auditors
For, except vote withheld from the following nominee(s).
--------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
SPECIAL ACTION Comments/Address Change (use [ ]
-------------- space on reverse side)
-------------------------------------------------------------
If available in the future, would [ ] Mark here if [ ]
you be interested in receiving you plan to
your proxy materials attend the
electronically? Annual Meeting
-------------------------------------------------------------
Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
-------------------------------------------------------------
-------------------------------------------------------------
Signature(s) Date
FOLD AND DETACH HERE
Control No. Above
Dear Shareholder:
Arch Chemicals, Inc. encourages you to take advantage of convenient ways by
which you can vote your shares. You can vote your shares electronically through
the Internet or the telephone. This eliminates the need to return the proxy
card.
To vote your shares electronically you must use the control number. The control
number is the series of numbers printed in the box above, just below the
perforation. This control number must be used to access the system.
To ensure that your vote will be counted, please cast your Internet or telephone
vote before 11:59 p.m., New York time, on April 25, 2001; however, for CEOP
participants, the deadline for Internet and telephone voting is 9:00 a.m., New
York time, on April 25, 2001.
1. To vote over the Internet:
. Log on to the Internet and go to the web site http://www.eproxyvote.com/arj
2. To vote over the telephone:
. On a touch-tone telephone call toll free 1-877-PRX-VOTE (1-877-779-8683)
24 hours a day, 7 days a week.
. Outside of the U.S. and Canada call 201-536-8073
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING
(Bring this ticket with you if attending the
meeting)
ADMISSION TICKET
[LOGO OF ARCH CHEMICALS] Annual Meeting of Shareholders
of Arch Chemicals, Inc.
Thursday, April 26, 2001
10:00 a.m., local time
Prudential Center for Learning and Innovation
32 Weed Avenue
Norwalk, Connecticut