EXHIBIT 10.1 FORM OF EXECUTIVE AGREEMENT

EXHIBIT 10.1

 

FORM OF

EXECUTIVE AGREEMENT

 

Agreement between Arch Chemicals, Inc., a Virginia corporation (“Arch Chemicals”), and                          (the “Executive”), dated as of                              ,             .

 

Arch Chemicals and the Executive agree as follows:

 

1. Definitions.

 

As used in this Agreement:

 

(a) “Cause” means the willful and continued failure of the Executive to substantially perform his or her duties; the willful engaging by the Executive in gross misconduct significantly and demonstrably financially injurious to Arch Chemicals; or willful misconduct by the Executive in the course of his or her employment which is a felony or fraud. No act or failure to act on the part of the Executive will be considered “willful” unless done or omitted not in good faith and without reasonable belief that the action or omission was in the interests of Arch Chemicals or not opposed to the interests of Arch Chemicals.

 

(b) “Change in Control” means:

 

(i) Arch Chemicals ceases to be, directly or indirectly, owned of record by at least 1,000 shareholders;

 

(ii) A person, partnership, joint venture, corporation or other entity, or two or more of any of the foregoing acting as a “person” within the meaning of Section 13(d)(3) of the 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’ shareholders was approved by a vote of at least two-thirds of the Directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors then in office;

 

(iv) All or substantially all of the business of Arch Chemicals is disposed of pursuant to a merger, consolidation or other transaction in which Arch Chemicals

is not the surviving corporation or Arch Chemicals combines with another company and is the surviving corporation (unless the shareholders of Arch Chemicals immediately following such merger, consolidation, combination, or other transaction beneficially own, directly or indirectly, more than 50% of the aggregate voting stock or other ownership interests of (x) the entity or entities, if any, that succeed to the business of Arch Chemicals or (y) the combined company) or

 

(v) Approval by Arch Chemicals’ shareholders of (i) a sale of all or substantially all the assets of Arch Chemicals or (ii) a liquidation or dissolution of Arch Chemicals.

 

(c) “Disability” means that the Executive has suffered an incapacity due to physical or mental illness which meets the criteria for disability established at the time under Arch Chemicals’ short-term disability plan.

 

(d) “Executive Severance” means:

 

(i) twelve months of the Executive’s then current monthly salary (without taking into account any reductions which may have occurred at or after the date of a Change in Control); plus

 

(ii) an amount equal to the greater of (A) the Executive’s average annual award actually paid under Arch Chemicals’ short-term annual cash incentive compensation plans or programs (“ICP”) (including zero if nothing was paid or deferred but including any portion thereof the Executive has elected to defer) for the three completed fiscal years immediately preceding the date of Termination (or if the Executive has not participated in ICP for such three completed fiscal years, the average of any such awards for the shorter period of years in which the Executive was a participant) and (B) the Executive’s then current ICP standard annual award.

 

(e) “Potential Change in Control” means:

 

(i) Arch Chemicals has entered into an agreement the consummation of which would result in a Change in Control;

 

(ii) any person (including Arch Chemicals) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control;

 

(iii) Arch Chemicals learns that any person (other than an employee benefit plan of Arch Chemicals or a subsidiary of Arch Chemicals (or the plan’s related trust)) has become the beneficial owner directly or indirectly of securities of Arch Chemicals representing 9.5% or more of the combined voting power of Arch Chemicals’ then outstanding securities ordinarily entitled to vote in elections of directors; or

 

(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) Following a Change in Control, the Executive’s duties, position or reporting responsibilities are diminished.

 

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For purposes solely of clarification, it is understood that (i) if, in connection with the spinoff of an Arch Chemicals business or Arch Chemicals’ assets as a separate public company to Arch Chemicals’ shareholders, the Executive accepts employment with, and becomes employed at, the spunoff company or its affiliates, the termination of the Executive’s employment with Arch Chemicals shall not be considered a “Termination” for purposes of this Agreement, provided that a Change in Control shall not have occurred prior to the termination of the Executive’s employment with Arch Chemicals and (ii) except as provided in paragraph 4(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; Effectiveness of this Agreement. This Agreement shall become effective immediately upon the expiration of the current Executive Agreement dated                     ,              between Arch Chemicals and the Executive. Once this Agreement becomes effective, (i) this Agreement supersedes and replaces such earlier Executive Agreement and (ii) the Executive hereby releases and forever discharges Arch Chemicals and its affiliates from any and all obligations or claims the Executive may have with respect to such prior Executive Agreement and waives any obligations or rights Executive may have accrued under such prior Executive Agreement, including obligations which may arise under any circumstances, occurring prior to the date this Agreement became effective.¹

 

3. Term/Executive’s Duties.

 

(a) The term of this Agreement shall expire at the end of December 31, 2007 (subject to extension and renewal as provided herein). If during the term of this Agreement (including any term resulting from any extension or renewal whatsoever) a Potential Change in Control or Change in Control occurs, the then applicable term shall be extended to the later of (i) the end of the calendar year of the third anniversary of the date on which any Potential Change in Control occurs and (ii) the end of the calendar year of the third anniversary of the date on which any Change in Control occurs. At the end of each term of this Agreement (including any term resulting from any extension or renewal whatsoever) the then applicable term shall be automatically renewed for a successive one year term unless and until the Board of Directors of Arch Chemicals (or the Compensation Committee thereof) adopts a resolution prior to the end of the then applicable term that states this Agreement shall not be renewed for such one year period, in which case this Agreement shall expire at the end of the then applicable term provided no subsequent Potential Change in Control or Change in Control occurs. No expiration of this Agreement will 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

1	If Executive had a previous Tier II Agreement, revise this paragraph accordingly. If Executive did not have a previous Tier I or Tier II Agreement, delete this paragraph and replace with “This paragraph intentionally left blank.”

 

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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.

 

4. Executive Severance Payment.

 

(a) In the event of a Termination occurring before the expiration of this Agreement, Arch Chemicals will pay the Executive a lump sum in an amount equal to the Executive Severance. The payment will be made within 30 days of the Termination or if a Change in Control has occurred, within 10 days of the Termination.

 

(b) In the event of a Termination after a Change in Control has occurred, in addition to the Executive Severance paid under paragraph 4(a) above, Arch Chemicals will pay a Change in Control severance premium to the Executive in an amount equal to the sum of: (i) two times the Executive Severance plus (ii) three times the higher of (x) Executive’s annual long term incentive target as last determined by the Arch Chemicals’ Board of Directors (or committee thereof) prior to the Change in Control and (y) the Executive’s annual long term incentive target as in effect immediately prior to the Termination. The Change in Control severance premium, if it becomes due, will be made within 10 days of the Termination.

 

(c) The amount due under paragraph 4(a) and 4(b), if any, will be reduced to the extent that, if such amount in the aggregate were paid in equal monthly installments over a 12-month period (or in the event both paragraph 4(a) and 4(b) are applicable, a 36-month period), no installment would be paid after the Executive’s sixty-fifth birthday.

 

(d) The Executive will not be required to mitigate the amount of any payment provided for in paragraph 4(a) or 4(b) by seeking other employment or otherwise, nor shall any compensation received by the Executive from a third party reduce such payment except as explicitly provided in this Agreement. Except as may otherwise be expressly provided herein, nothing in this Agreement will be deemed to reduce or limit the rights which the Executive may have under any employee benefit plan, policy or arrangement of Arch Chemicals. Except as expressly provided in this Agreement, payments made under 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.

 

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(e) If the Executive receives the Executive Severance, the Executive will not be entitled to receive any other severance otherwise payable to the Executive under any other severance plan of Arch Chemicals. If on the Termination date the Executive is eligible and is receiving payments under any then existing Arch Chemicals disability plan, then the Executive agrees that all such payments may, and will be, suspended and offset for 12 months (or in the event paragraph 4(b) is also applicable, 36 months) (subject to applicable law) following the Termination date. If after such period the Executive remains eligible to receive disability payments, then such payments shall resume in the amounts and in accordance with the provisions of the applicable Arch Chemicals disability plan.

 

(f) In the event the Executive, in connection with the sale of an Arch Chemicals business to a third party or the transfer of an Arch Chemicals business or Arch Chemicals assets to a joint venture which would be owned directly or indirectly by Arch Chemicals with one or more third parties, ceases to be employed by Arch Chemicals and with Arch Chemicals’ consent becomes employed by the buyer or its affiliates or the joint venture or its affiliates, the Executive shall be entitled to the benefits provided under paragraph 4(a) (using Arch Chemicals figures at the time of new employment) (subject to paragraphs 4(c), 4(d) and 4(e)) and the first sentence of paragraph 5(a) (subject to paragraph 5(c)), and paragraph 5(d), if the Executive has a Termination as defined in paragraph 1(f) with his or her new employer (with the new employer being substituted for Arch Chemicals in such paragraph 1(f) and without giving any effect to the Change in Control references contained therein following such new employment) within 12 months of becoming employed by such new employer. Any cash compensation amounts paid under this paragraph 4(f) shall be reduced by any severance, job transition or employment termination payments such Executive receives in cash from his or her new employer in connection with the Termination. In connection with this paragraph 5(f), in no event shall the Change in Control provisions of this Agreement be applicable once Executive ceases to be employed by Arch Chemicals.

 

(g) If the Termination occurs prior to a Change in Control, no Executive Severance and, except for payments and benefits that the Employee is legally entitled to by employment or labor law in the absence of this Agreement, no other benefits and payments pursuant to paragraph 5 below, will be paid or credited to the Executive unless and until the Executive shall have execut