Olin DEF 14A 2009
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
Reg. Section 240.14a-101.
SEC 1913 (3-99)
190 CARONDELET PLAZA, SUITE 1530, CLAYTON, MISSOURI 63105
March 11, 2009
Dear Olin Shareholder:
We cordially invite you to attend our 2009 annual meeting of shareholders on April 23, 2009.
This booklet includes the notice and proxy statement, which describes the business we will conduct at the meeting and provides information about Olin that you should consider when you vote your shares. We have not planned a communications segment or any multimedia presentations for the 2009 annual meeting.
Mr. Anthony W. Ruggiero, a Class I director, resigned from the board in June 2008 after nine years of service on the board. The board thanks Mr. Ruggiero for his contributions and extends its best wishes in his future endeavors.
We have added two new directors since our 2008 annual meeting. Mr. Vincent J. Smith is the retired President and Chief Executive Officer of Dow Chemical Canada, a subsidiary of The Dow Chemical Company and was elected by the board and began serving in August 2008. Mr. Gray G. Benoist is the Vice President, Finance and Chief Financial Officer of Belden, Inc. and was elected by the board and began serving in February 2009. As required by Virginia law and Olins Bylaws, Messrs. Benoist and Smith are standing for re-election by the shareholders at this years annual meeting.
Whether or not you plan to attend, it is important that your shares are represented and voted at the annual meeting. If you do not plan to attend the annual meeting, you may vote your shares on the Internet, by telephone or by completing and returning the proxy card in the enclosed envelope. If you plan to attend the annual meeting, please bring the lower half of your proxy card to use as your admission ticket for the meeting.
At last years annual meeting more than 87% of our shares were represented in person or by proxy. We hope for the same high level of representation at this years meeting and we urge you to vote as soon as possible.
YOUR VOTE IS IMPORTANT
We urge you to promptly vote the shares on the Internet, by
telephone or by completing, signing, dating and returning
your proxy card in the enclosed envelope.
Notice of Annual Meeting of Shareholders
March 11, 2009
ANNUAL MEETING OF SHAREHOLDERS
To be Held April 23, 2009
Why did I receive this proxy statement?
You received this proxy statement because you owned shares of Olin common stock, par value $1 per share, which we sometimes refer to as common stock, at the close of business on February 27, 2009. Olins board of directors is asking you to vote at the 2009 annual meeting for each of the director nominees identified in Item 1 and for Items 2 and 3 listed in the notice of the annual meeting of shareholders. This proxy statement describes the matters on which we would like you to vote and provides information so that you can make an informed decision.
When was this proxy material mailed to shareholders?
We began to mail the proxy statement and form of proxy to shareholders on or about March 11, 2009.
What if I have questions?
If you have questions, please write them down and send them to the Secretary at Olins principal executive office at 190 Carondelet Plaza, Suite 1530, Clayton, MO 63105.
What will I be voting on?
You will be voting on:
Could other matters be voted on at the annual meeting?
As of March 11, 2009, the items listed in the preceding question are the only matters being considered. 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 and opinion as to what is in the best interests of Olin.
How does the board recommend I vote on the proposals?
The board recommends a vote for each of the director nominees identified in Item 1 and for Items 2 and 3.
How can I obtain directions to be able to attend the annual meeting and vote in person?
You may obtain directions to the Chase Park Plaza Hotel in Clayton, MO by contacting the Chase Park Plaza Hotel at (314) 633-3000 or by accessing their website at http://www.chaseparkplaza.com/contact/maps.phtml.
Who can vote?
All shareholders of record at the close of business on February 27, 2009 are entitled to vote at the annual meeting.
How many votes can be cast by all shareholders?
At the close of business on February 27, 2009, the record date for voting, we had outstanding 77,545,223 shares of common stock. Each shareholder on the record date may cast one vote for each full share owned. The presence in person or by proxy of the holders of a majority of such shares constitutes a quorum. If a share is present for any purpose at the meeting, it is deemed to be present for the transaction of all business. Abstentions, withheld votes in the election of directors and shares held in street name that are voted on any matter will be included in determining the number of votes present. Shares held in street name that are not voted on any matter at the meeting will not be included in determining whether a quorum is present.
How do I vote?
You may vote either in person at the annual meeting or by proxy. To vote by proxy, you must select one of the following options:
If you vote in a timely manner by the Internet or telephone, you do not have to return the proxy card for your vote to count. The Internet and telephone voting procedures appear in the middle of the enclosed proxy card. You may also log on to change your vote or to confirm that your vote has been properly recorded.
If you want to vote in person at the annual meeting, and you own your common stock through a custodian, broker or other agent, you must obtain a proxy from that party in their capacity as owner of record for your shares and bring the proxy to the annual meeting.
Where can I access an electronic copy of the Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2008?
Important Notice Regarding Availability of Proxy Materials for the Shareholder Meeting to Be Held on April 23, 2009
You may access an electronic, searchable copy of the Proxy Statement and the Annual Report on Form 10-K for the year ended December 31, 2008 at http://www.viewmaterial.com/oln.
How are votes counted?
If you specifically mark the proxy card (or vote by telephone or Internet) and indicate how you want your vote to be cast regarding any matter, your directions will be followed. If you sign and submit the proxy card but do not specifically mark it with your instructions as to how you want to vote, the proxy will be voted for the election of the directors named in this proxy statement in Item 1 and in favor of Items 2 and 3 listed in the proxy.
National City Bank tabulates the shareholder votes and provides an independent inspector of election as part of its services as our registrar and transfer agent. If you submit a proxy card marked abstain or withhold on any item other than election of directors, your shares will not be voted on the item so marked and your vote will not be included in determining the number of votes cast on that matter.
Can I change my vote?
Yes. Whether you vote by Internet or telephone or submit a proxy card with your voting instructions, you may revoke or change your vote by:
When are the votes due?
Proxies submitted by shareholders by Internet or by telephone will be counted in the vote only if they are received by 11:59 p.m. Eastern Daylight Time on April 22, 2009. Shares represented by proxies on the enclosed proxy card will be counted in the vote at the annual meeting only if we receive your proxy card by April 22, 2009. Proxies submitted by CEOP participants will be counted in the vote only if they are received by 11:59 p.m. Eastern Daylight Time on April 20, 2009.
How do I vote my shares held in the Olin Contributing Employee Ownership Plan or the Arch Chemicals, Inc. Contributing Employee Ownership Plan?
On February 27, 2009, the Olin Corporation Contributing Employee Ownership Plan (Olin CEOP) held 4,107,524 shares of our common stock and the Arch Chemicals, Inc. Contributing Employee Ownership Plan (Arch CEOP) held 232,173 shares. We sometimes refer to one or both of these plans as the CEOP. State Street Bank and Trust Company serves as the Trustee of the Olin CEOP and JPMorgan Chase Bank serves as Trustee of the Arch CEOP. If you are a participant in either CEOP, you may instruct the Trustee of that CEOP how to vote shares of common stock credited to you on the items of business listed on the proxy card by voting on the Internet or telephone or by indicating your instructions on your proxy card and returning it to us. The Trustees will vote shares of common stock held in the CEOP for which they do not receive voting instructions in the same manner proportionately as they vote the shares of common stock for which they do receive instructions.
How do I vote my shares held in the Automatic Dividend Reinvestment Plan?
National City Bank is our registrar and transfer agent and administers the Automatic Dividend Reinvestment Plan. If you participate in our Automatic Dividend Reinvestment Plan, National City Bank will vote any shares of common stock that it holds for you in accordance with your instructions indicated on the proxy card you return or the vote you make by Internet or telephone. If you do not submit a proxy card for your shares of record or vote by Internet or telephone, National City Bank will not vote your dividend reinvestment shares.
Can I contact board members directly?
Our audit committee has established the following methods for shareholders or other interested parties to communicate directly with the board and/or its members.
The Olin Board or (Name of the director)
c/o Office of the Secretary
190 Carondelet Plaza, Suite 1530
Clayton, MO 63105
Who pays for this proxy solicitation?
Olin will pay the entire expense of this proxy solicitation.
Who solicits the proxies and what is the cost of this proxy solicitation?
Our board is soliciting the proxies. We have hired The Proxy Advisory Group, LLC (Proxy Advisory Group), a proxy solicitation firm, to assist us with the distribution of proxy materials and vote solicitation. We will pay Proxy Advisory Group approximately $10,000 for its services and will reimburse Proxy Advisory Group for payments made to brokers and other nominees for their expenses in forwarding proxy solicitation materials.
How will the proxies be solicited?
Proxy Advisory Group will solicit proxies by personal interview, mail, and telephone, and will request brokerage houses and other custodians, brokers and other agents to forward proxy solicitation materials to the beneficial owners of Olin common stock for whom they hold shares. Our directors, officers and employees may also solicit proxies by personal interview and telephone.
How can I submit a shareholder proposal at the 2010 annual meeting?
If you want to present a proposal to be considered for inclusion in the 2010 proxy statement for the 2010 annual meeting, you must deliver the proposal in writing to the Secretary at Olin Corporation, 190 Carondelet Plaza, Suite 1530, Clayton, MO 63105 no later than November 11, 2009. You must then present your proposal in person at the 2010 annual meeting.
If you want to present a proposal for consideration at the 2010 annual meeting without including your proposal in the proxy statement, you must deliver a written notice (containing the information required by Olins Bylaws) to the Secretary at Olin Corporation, 190 Carondelet Plaza, Suite 1530, Clayton, MO 63105 no later than January 22, 2010. You must also present your proposal in person at the 2010 annual meeting.
How can I directly nominate a director for election to the board at the 2010 annual meeting?
According to Olins Bylaws, if you are a shareholder you may directly nominate an individual for election to the board if you deliver a written notice of the nomination to Olins Secretary no later than January 22, 2010. Your notice must include:
Although a shareholder may directly nominate an individual for election as a director, the board is not required to include such nominee in the proxy statement.
How can I recommend a director for the slate of candidates to be nominated by Olins board for election at the 2010 annual meeting?
In addition to directly nominating an individual for election to the board as discussed above, you can suggest that our Directors and Corporate Governance Committee consider a person for inclusion in the slate of candidates to be proposed by the board for election at the 2010 annual meeting. You can recommend a person by delivering written notice to Olins board no later than October 12, 2009. The notice must include the information described under the heading What is Olins Director Nomination Process? on page 17, and must be sent to the address indicated under that heading. As noted above, the board is not required to include such nominee in the proxy statement.
How can I obtain shareholder information?
Shareholders may contact National City Bank, our registrar and transfer agent, who also manages our Automatic Dividend Reinvestment Plan at:
National City Bank Shareholder Services Operations
Locator 5352, PO Box 92301
Cleveland, OH 44101-4301
Telephone: (800) 622-6757
For technical assistance with this website, call Shareholder Communications at (800) 622-6757 between 8 a.m. 5 p.m. Eastern Time, Monday Friday.
Shareholders can sign up for NCStockAccess through National City Bank for fast, easy and secure access 24 hours a day, 7 days a week for future proxy materials, investment plan statements, tax documents and more. To sign up log on to NCStockAccess at www.nationalcity.com/shareholderservices where step-by-step instructions will prompt you through enrollment or you may call (800) 622-6757 for customer service.
CERTAIN BENEFICIAL OWNERS
Except as listed below, to our knowledge, no person beneficially owned more than five percent of our common stock as of February 28, 2009.
ITEM 1PROPOSAL FOR THE ELECTION OF DIRECTORS
NOMINEES FOR THREE-YEAR TERMS EXPIRING IN 2012
NOMINEE FOR TWO-YEAR TERM EXPIRING IN 2011
NOMINEE FOR ONE-YEAR TERM EXPIRING IN 2010
The board recommends that you vote FOR the election of Messrs. Bogus, Schulz and Smith as Class III directors, Mr. Benoist as a Class II director and Mr. OConnor as a Class I director.
Who are the individuals nominated by the board to serve as directors?
The board of directors is divided into three classes. Each class has a term of office for three years, and the term of each class ends in a different year. The board of directors elected two new directors since the 2008 Annual Shareholders Meeting, one filled the vacancy created by Virginia Kamsky, who decided not to run for re-election in 2008 and the other filled the vacancy created by the resignation of Anthony Ruggiero in June 2008. Virginia law and Olins Bylaws require that any director elected by the board of directors shall serve only until the earlier of the next election of directors by the shareholders or until his or her successor is elected or until his or her earlier death, resignation or removal. The board has nominated Messrs. Bogus, Schulz and Smith for re-election by the shareholders as Class III directors, with terms expiring in 2012, Mr. Benoist as a Class II director with a term expiring in 2011 and Mr. OConnor as a Class I director with a term expiring in 2010.
How many votes are required to elect a director?
A nominee will be elected as a director if a plurality of the votes cast in the election is in favor of the nominee. Abstentions and shares held in street name that are not voted in the election of directors will not be included in determining the number of votes cast and will not affect the outcome of the vote in the election of directors.
Who are the other remaining directors and when are their terms scheduled to expire?
The terms of the following directors will continue after the 2009 annual meeting, as indicated below.
DIRECTORS WHOSE TERMS CONTINUE UNTIL 2010
DIRECTORS WHOSE TERMS CONTINUE UNTIL 2011
The terms of the other directors will continue after the annual meeting as indicated above. The board expects that all of the nominees will be able to serve as directors. If any nominee is unable to accept election, a proxy voting in favor of such nominee will be voted for the election of a substitute nominee selected by the board, unless the board reduces the number of directors.
CORPORATE GOVERNANCE MATTERS
How many meetings did board members attend?
During 2008, the board held eight meetings. As part of each board meeting, the non-executive directors met in executive session. All directors attended at least 75% of the meetings of the board and committees of the board on which they served. All of our directors attended the 2008 annual shareholders meeting. Our policy regarding directors attendance at the annual shareholders meeting is that they are required to attend, absent serious extenuating circumstances.
Which board members are independent?
Our board has determined that all of its members, except Mr. Rupp, are independent in accordance with applicable New York Stock Exchange (NYSE) listing standards and applicable provisions of our Principles of Corporate Governance. In determining independence, the board confirms that a director has no relationship with Olin that violates the bright line independence standards under the NYSE listing standards. The board also reviews whether a director has any other material relationship with Olin, after consideration of all relevant facts and circumstances. In assessing the materiality of a directors relationship to Olin, the board considers the issues from the directors standpoint and from the perspective of the persons or organizations with which the director has an affiliation. The board reviews commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships.
In 2008, we sold an aggregate of approximately $174,000 of chlor alkali products to The Lubrizol Corporation and approximately $2,100 of chlor alkali products to Campbell Soup Company. One of our directors, Donald Bogus, retired as senior vice president of Lubrizol in January 2009. Our board determined that Mr. Bogus had no material interest in these sales transactions because the transactions were made on our customary terms and conditions, and amounted to less than 0.004% of Lubrizols total sales. One of our directors, Randall Larrimore, serves on the board of directors of Campbell Soup Company. Our board determined that Mr. Larrimore had no material interest in these sales transactions because the transactions were made on our customary terms and conditions, and amounted to 0.0001% of Campbells total sales.
In 2008, we matched charitable contributions made by several directors under our 50% matching contribution program, which is available to all employees. None of those amounts exceeded $5,000 and our board determined that such minimal charitable contribution matches do not constitute the type of relationship that could impair a directors independence.
Does Olin have corporate governance guidelines and a code of conduct?
The board has adopted Principles of Corporate Governance and a Code of Conduct. The Code of Conduct applies to our directors and all of our employees, including our chief executive officer, chief financial officer, and principal accounting officer/controller. We discuss certain provisions of these documents in more detail below under the heading Review, Approval or Ratification of Transactions with Related Persons.
Each member of our board of directors, except Gray G. Benoist who joined the Board in February 2009, has completed a director education course within the last two years of at least eight hours in duration, accredited by RiskMetrics (formerly Institutional Shareholder Services).
Each of our three major standing board committees (Audit, Compensation and Directors and Corporate Governance) acts under a written charter adopted by the board. All of these documents can be viewed on our website at www.olin.com in the Governance section under Governance Documents
and Committees or are available from the company by writing to: George H. Pain, Vice President, General Counsel and Secretary, Olin Corporation, 190 Carondelet Plaza, Suite 1530, Clayton, MO 63105. In addition on that website, we will disclose any amendment to, or waiver from, a provision of our Code of Conduct for our directors and executive officers, including our chief executive officer, chief financial officer, principal accounting officer/controller or other employees performing similar functions.
Do Olins board and committees conduct evaluations?
As required by NYSE rules, Olins board of directors as well as its Audit, Compensation and Directors and Corporate Governance Committees each conduct an annual performance evaluation.
What are the committees of the board?
Our committees of the board are:
The Audit Committee, which held eight meetings during 2008, advises the board on internal and external audit matters affecting us. The audit committee acts under a written charter adopted by the board in 1997, and reviewed and updated in 2006. In accordance with NYSE listing standards and applicable provisions of our Principles of Corporate Governance, the audit committee is comprised solely of directors who meet the enhanced independence standards for audit committee members under the Securities Exchange Act of 1934 (Exchange Act) and the related rules as incorporated into the NYSE standard for independence. Its members are: Philip J. Schulz, Chair, Gray G. Benoist, Randall W. Larrimore, John M. B. OConnor and Richard M. Rompala. Mr. Benoist became a committee member when he joined the board on February 19, 2009 and did not have the opportunity to attend committee meetings prior to that time. The board has determined that Philip J. Schulz meets the SEC definition of an audit committee financial expert and that each of the members of the audit committee is financially literate, as such term is interpreted by the board in its business judgment. The audit committee:
The Compensation Committee, which held six meetings during 2008, sets policy, develops and monitors strategies for, and administers, the programs that are used to compensate the chief executive officer and other senior executives. In accordance with NYSE listing standards and applicable provisions of our Principles of Corporate Governance, the compensation committee is comprised solely of directors who meet the NYSE standard for independence. Its members are: Richard M. Rompala, Chair, Donald W. Bogus, C. Robert Bunch, Randall W. Larrimore and Vincent J. Smith. Mr. Smith became a committee member when he joined the board on August 21, 2008 and did not have the opportunity to attend committee meetings prior to that time. The compensation committee:
The compensation committees charter authorizes the committee to delegate certain responsibilities to internal and independent accountants, internal and outside lawyers and other internal staff.
The Directors and Corporate Governance Committee, which held five meetings during 2008, assists the board in fulfilling its responsibility to our shareholders relating to the selection and nomination of officers and directors. In accordance with NYSE listing standards and applicable provisions of our Principles of Corporate Governance, the directors and corporate governance committee is comprised solely of directors who meet the NYSE standard for independence. Its members are: Randall W. Larrimore, Chair, Gray G. Benoist, Donald W. Bogus, C. Robert Bunch, John M. B. OConnor, Richard M. Rompala, Philip J. Schulz and Vincent J. Smith. Mr. Smith became a
committee member when he joined the board on August 21, 2008 and Mr. Benoist became a committee member when he joined the board on February 19, 2009. Messrs. Smith and Benoist did not have the opportunity to attend committee meetings prior to the time they joined the board. The directors and corporate governance committee:
The Executive Committee meets as needed in accordance with our Bylaws. Between meetings of the board, the executive committee may exercise all the power and authority of the board (including authority and power over our financial affairs) except for matters reserved to the full board by Virginia law and matters for which the board gives specific directions. During 2008, this committee held no meetings. The executive committee members are: Joseph D. Rupp, Chair, Randall W. Larrimore, Richard M. Rompala and Philip J. Schulz.
Compensation Committee Interlocks and Insider Participation
No member of our compensation committee during 2008:
None of our executive officers:
What is Olins director nomination process?
Our directors and corporate governance committee acts as our nominating committee. As a policy, the committee considers any director candidates suggested by shareholders if we receive the appropriate information in a timely manner. Our Principles of Corporate Governance provide that the Board Chair and Chief Executive Officer, Lead Director, other directors, employees and shareholders, may recommend director nominees to the committee. The committee uses the same process to review and evaluate all potential director nominees, regardless of who recommends the candidate. The committee reviews and evaluates each nominee and the Committee Chair, the Board Chair and CEO and Lead Director interview the potential board candidates selected by the committee. The interview results, along with the committees recommended nominees, are submitted to the full board.
Criteria for new board members include recognized achievement plus skills such as a special understanding or ability to contribute to some aspect of Olins business. Racial and gender diversity are important but not at the expense of particular qualifications and experience that are required to meet the needs of the board. The committee also strives to include board members with the personal qualities and experience that taken together will ensure a strong board of directors. The principal qualities of an effective corporate director include strength of character, an inquiring and independent mind, practical wisdom, and mature judgment.
This year, we have five nominees standing for re-election. Two of these individuals joined Olins board since our 2008 annual shareholders meeting: Vincent J. Smith and Gray G. Benoist. Mr. Smith was elected by the board and began serving in August 2008 and Mr. Benoist was elected by the board and began serving in February 2009. Messrs. Smith and Benoist were recommended by an outside director search firm that the board retained to identify potential candidates.
A shareholder can suggest a person for nomination as a director by providing the name and address of the candidate, and a detailed description of his or her experience and other qualifications for the position, in writing addressed to the board of directors in care of the Secretary, Olin Corporation, 190 Carondelet Plaza, Suite 1530, Clayton, MO 63105. The notice may be sent at any time, but for a candidate to be considered by the committee as a nominee for an annual shareholder meeting, we must receive the written information at least 150 days before the anniversary of the date of the prior years proxy statement. For example, for candidates to be considered for nomination by the committee at the 2010 annual meeting, we must receive the information from shareholders on or before October 12, 2009.
In addition to shareholders proposing candidates for consideration by the committee, Olins Bylaws allow shareholders to directly nominate individuals at the annual shareholder meeting for election to the board by delivering a written notice as described under the heading How can I directly nominate a director for election to the board at the 2010 meeting? on pages 5 and 6 under the heading Miscellaneous above. Although a shareholder may directly nominate an individual for election as a director, the board is not required to include such nominee in the proxy statement.
Who presides at executive sessions of the board of directors?
In accordance with our Principles of Corporate Governance, Richard M. Rompala, our Lead Director, typically presides during executive sessions of the boards independent directors.
Report of the Audit Committee
The audit committees primary responsibility is to assist the board in its oversight of the integrity of the Corporations financial reporting process and systems of internal control, to evaluate the independence and performance of the Corporations independent registered public accounting firm, KPMG LLP, and internal audit functions and to encourage private communication between the audit committee and KPMG and the internal auditors.
The committee held eight meetings during the year. During the second half of 2008, the audit committee also completed a self-assessment.
In discharging its responsibility, the audit committee reviewed and discussed the audited financial statements for fiscal year 2008 with Management and KPMG, including the matters required to be discussed by Statement on Auditing Standards (SAS) No. 61, Communication with Audit Committees.
In addition, the audit committee has received the written disclosures and the letter from KPMG required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMGs communications with the audit committee concerning independence. The audit committee discussed with KPMG the issue of its independence from Olin and reviewed KPMGs reports on the firms quality review procedures and findings, results of peer reviews and investigations and inquiries, including corrective actions taken. The audit committee also negotiated the hiring of KPMG for the 2008 audit and pre-approved all fees which SEC rules require the committee to approve to ensure that the work performed was permissible under applicable standards and would not impair KPMGs independence.
Based on the audit committees discussions with management and KPMG and the audit committees review of KPMGs written report and the other materials discussed above, the audit committee recommended that the board of directors include the audited consolidated financial statements in Olins Annual Report on Form 10-K for the year ended December 31, 2008, to be filed with the SEC.
February 19, 2009
Philip J. Schulz, Chair
Randall W. Larrimore
John M. B. OConnor
Richard M. Rompala
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
How much stock is beneficially owned by each director and nominee for director and by the named executive officers in the Summary Compensation Table?
This table shows how many shares of our common stock certain persons beneficially owned on January 15, 2009. Those persons include each director and director nominee, each named executive officer (NEO) in the Summary Compensation Table on page 31, and all directors and executive officers as a group. A person has beneficial ownership of shares if the person has voting or investment power over the shares or the right to acquire such power within 60 days. Investment power means the power to direct the sale or other disposition of the shares. Each person has sole voting and investment power over the number of shares listed, except as noted in the following table.
Review, Approval or Ratification of Transactions with Related Persons
Our Principles of Corporate Governance and our Code of Conduct include policies and procedures requiring pre-approval of certain transactions involving our directors and employees and their family members and affiliated organizations if Olin is a direct or indirect participant. The policies define family member to mean a spouse, child, sibling, stepchild, stepparent, mother-, father-, son-, daughter-, or sister- in-law, or any other person living with the individual (except tenants and household employees). Affiliated organizations include those entities where the individual or family member serves as a director, executive officer or holder of 5% or more of the equity interests.
Our Principles of Corporate Governance require the directors and corporate governance committee (or, if that committee determines it is appropriate, the board) to pre-approve the following transactions with directors, family members and affiliated organizations:
Our Code of Conduct and related Corporate Policy Statement require the approval of the board of directors before an officer may serve as a director or provide services to another organization (as an officer, employee, consultant, etc.). Any such service by other employees must be pre-approved by our President and CEO, if the potential for a conflict of interest exists. These provisions also prohibit any employee or family member from having any direct or indirect interest in, or any involvement with or obligation to, any business organization (including any non-profit entity to which Olin makes contributions) which does or seeks to do business with Olin, or any Olin competitor, without pre-approval from the employees department head.
In granting pre-approval, the directors and corporate governance committee, board members and management focus on the best interests of Olin.
In addition to the pre-approval process described above, our Code of Conduct and related Corporate Policy Statements prohibit any director or employee from engaging in a transaction that might conflict with the best interests of Olin.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our officers and directors, and persons who beneficially own more than ten percent of our common stock, to file reports of ownership and changes in ownership with the SEC, and these persons must furnish us with copies of the forms they file. Officers, directors and ten-percent beneficial owners complied with all Section 16(a) filing requirements in 2008, except for the inadvertent late filing (by one day, each) of two Form 4 filings related to five stock option exercises by Richard Hammett.
COMPENSATION DISCUSSION AND ANALYSIS
We design our executive compensation policies and programs to attract, motivate and retain the highest quality executives, with a focus on shareholder return. Our goal is to compete in the market for people with the talent and skills we believe necessary to our success. We construct our executive compensation program and its various components to reflect market practices. Several components of executive compensation vary with our results to align our executives interests with those of our shareholders and provide a motivational element. We also design our program to provide an incentive to executives to achieve other strategic objectives consistent with our goals.
General Executive Compensation Process
Our compensation committee consists of directors determined to be independent under the NYSE listing criteria. The committee establishes total compensation opportunities (and each of the individual elements) for Joseph D. Rupp, Chairman, President and Chief Executive Officer (the CEO). The committee also approves compensation of the other named executive officers based on recommendations by the CEO.
To assist it in performing its duties, the committee engages Exequity LLP, an independent board and management advisory firm. Exequity does no other work for Olin and so provides the committee with independent advice. In 2008, the committee discussed its compensation philosophy with Exequity, but otherwise did not impose any specific limitations or constraints on, or otherwise direct, the manner in which Exequity performed its advisory services.
As advisor to the compensation committee, Exequity reviewed the total compensation strategy and pay levels for our named executive officers, examined all aspects of our executive compensation programs to ensure their ongoing support of our business strategy, informed the committee of developing legal and regulatory considerations affecting executive compensation and benefit programs, and provided general advice to the committee on all compensation decisions pertaining to the CEO and to all senior executive compensation recommendations submitted by management. The committee routinely meets in executive session (without the CEO or other officers present). As appropriate, Exequity attends some of those executive sessions. In addition to the committees retention of Exequity, Olin periodically retains one or more other compensation consulting firms to provide general services, such as actuarial services for pension plans.
Our compensation consultant provides significant market data to the committee, including an annual assessment of our relative position among a group of over 350 general manufacturing and services companies that we have used for benchmarking in the past several years, including 2008. This group of companies consists of the entire community of manufacturing and services companies that participate in the Hewitt Associates Total Compensation DataBase (the DataBase), excluding companies that operate in energy services, retail, health services, and financial sectors. Our committee reviews revenue-adjusted data from this cross-section of companies. We sometimes refer to this revenue-adjusted group as the comparator group. Our reliance on pay practices among a community as large and varied as the comparator group reflects the committees belief that our labor market for executive talent extends beyond the limited community of chemical and ammunition companies and spans all of the relevant manufacturing and services community. The committee believes that this group is a good representation of that labor pool, as the DataBase is a widely respected source of executive compensation information. Our decision to rely on it for competitive pay information ensures
that a reputable and unrelated organization actively secures and analyzes the compensation data on which our committee bases its judgment about appropriate levels of pay for our executive officers. Throughout this Compensation Discussion and Analysis, references to competitive data or market mean this statistical summarized data for the comparator group.
The data relied upon by the committee was a statistical summary of the pay practices for the companies in the comparator group, and was not representative of any individual company. In fact, the committee does not know the identity of the companies whose pay practices are reflected in the DataBase, nor does it receive information with respect to pay practices at any individual company included in the DataBase. Instead, the committee considered the median pay levels in the comparator group after adjusting the pay practices for an observable relationship between executive pay levels and company size and relied on those statistical representations as typifying revenue-adjusted general industry norms. It was against these norms that the committee drew its conclusions about the appropriateness of the executive officer pay levels and based its decisions about 2008 pay adjustments.
Elements of Compensation
Overview. The committee determines the total target compensation level for the CEO, as well as the appropriate mix of the compensation elements, based on prevailing practices in the comparator group. The CEO relies on comparator group standards to recommend, for the committees review and approval, the levels and mix of elements for all of our executive officers. Although the committee is not bound to mirror the comparator group standards when it makes decisions on compensation levels and the mix of elements, the committee generally relies heavily on the identified competitive norms to ensure that we can compete for executive talent. Certain components of executive compensation (such as portions of change in control payments) are based directly on salary and annual cash incentive. Other target components of compensation are linked to salaryfor example annual and long-term incentive awards.
For 2008 and 2009 compensation, the committee also reviewed the relationship between the CEOs compensation and the compensation for the other named executive officers. The committee determined that the pay relationships are appropriate in light of the committees understanding of the typical pay relationships at other companies.
We list the primary elements of our executive compensation below, together with relevant information about each element:
The percentage of total compensation allocated to each element varies by individual. The committee determines the appropriate mix of these elements after considering prevailing practices in the comparator group. Our executives also participate in certain other benefits, such as general health, life and disability insurance plans, most of which are available to all salaried employees.
As a guideline, the committee intends that expenditures with respect to base salaries, total cash compensation (salary and annual cash incentive), and total compensation (total cash compensation plus the grant date value of long-term incentive awards) approximate the median of the comparator group practices. The committee believes that managing overall pay to the market median allows us to attract, motivate, and retain the quality executive talent Olin needs. Actual pay levels for any individual named executive officer, however, may be below or above the median. The following table illustrates our pay objectives and our target compensation positioning for our named executive officers in 2008:
Our general practice for an executive who is new in his/her position is to establish compensation below the market, and to increase it to market level over the first several years, assuming that performance warrants such increases. Other material increases in compensation generally relate to promotions or added responsibilities. For example, when Mr. Rupp became CEO in 2002, his base salary was well below the median of the comparator group, largely to reflect his short tenure as our CEO. During the past three years, Mr. Rupps salary has been near the median level of the comparator group.
Salary. The committee generally makes salary adjustments for the named executive officers on an annual basis, but when warranted by cash flow considerations, this period has been extended to 18 months or more, and we have frozen executive base salaries for periods of time. In the past 10 years, we have not decreased base salary for any named executive officer.
After reviewing comparator group practices, the committee determined that increases were required in 2008 to ensure that salaries for our executive officers approximated the market median. The committee approved the following salaries for our named executive officers, effective April 1, 2008: Mr. Rupp - $860,000; Mr. Fischer - $386,000; Mr. Pain - $376,000; Mr. McIntosh - $353,000; and Mr. McGough - $285,000. In each instance, the approved increase reflected the committees assessment of:
Annual Cash Incentive (Non-equity Incentive Plan Compensation). Named executive officers participate in the Senior Management Incentive Compensation Plan, or SMICP, an incentive plan approved by our shareholders. The SMICP provides named executive officers with annual cash incentive opportunities comparable to the terms and conditions for awards of cash bonuses to our other executives (who participate in our Management Incentive Compensation Plan, or MICP). Using the SMICP for our named executive officers allows us to deduct payments to those individuals subject to the deduction limits of Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code).
The mechanics of the SMICP operation in 2008 were as follows:
Although the committee exercises discretion to reduce annual incentives under the SMICP, it may not increase the payments above the maximum amounts established as described above, and the payout under the SMICP may not exceed 200% of the executives base salary. When using its discretion to reduce annual incentives for 2008, the committee examined achievement with respect to financial goals and non-financial strategic accomplishments. In determining SMICP payments for named executive officers with company-wide responsibility (Messrs. Rupp, Fischer, Pain and McGough), the committee considered the Companys financial performance, especially 2008 net income of $157.7 million, an increase of 56% over 2007, coupled with record performance in both operating divisions. In consideration of these results, the committee used its discretionary assessment of named executive officer performance for the year and approved the awards identified in the Summary Compensation Table. Each of these approved awards represents a reduction in award level from the recipients maximum permissible portion of the SMICP pool.
For Mr. McIntosh, who has divisional responsibility, the committee adopted a blended consideration of Olin and divisional accomplishments, and applied a more formulaic approach to SMICP award determination. The committee decided that 25% of Mr. McIntoshs overall award should be a function of Olin financial and non-financial accomplishments and 75% of his overall incentive award should reflect Chlor Alkali Products performance (where Chlor Alkali Products division financial objectives were assigned a 75% weight and division non-financial strategic objectives were assigned a 25% weight). The committees discretionary decisions with respect to Mr. McIntoshs SMICP award for 2008 reflected his contribution in connection with the acquisition of Pioneer and the subsequent successful integration efforts and record pre-tax profits in the Chlor Alkali Products division. After reviewing these results, the committee used its discretion to approve for Mr. McIntosh the SMICP payment identified in the Summary Compensation Table.
Long Term Incentive Compensation. In 2008, we allocated the value of long-term incentive compensation awards equally between performance shares and stock options. This combination of awards was deemed by the committee to optimize our emphasis on achieving stipulated performance goals that drive investor value and generating long-term appreciation in Olins stock price. The committee makes all awards to executive officers (both performance shares and stock options). The committee believes that its determination of stock option and performance share awards is highly representative of external market practices (the comparator group).
All long-term incentive compensation plan participants are assigned target award levels at dollar values deemed by the committee to be competitive with external market practices (the comparator group). The sum of all individual target awards represents our overall long-term incentive award value. The process the committee follows to determine stock option and performance share awards is described below.
Performance Shares. Half the value of each participants 2008 long-term incentive target award value was delivered in performance shares. The number of performance shares awarded to each participant was formulated by dividing half the participants target award value by the economic value of a performance share. Each executive received a target number of performance shares in early 2008, which vest after the end of 2010, but the total number of performance shares that vest may vary between 25% and 150% of the target number. The actual number of performance shares that vest depends on our average annual return on capital for the three years ending December 31, 2010, in relation to the average annual return on capital among the Modified S&P 1000 for that period, as set forth in more detail in the chart below:
Olins return on capital performance against the Modified S&P 1000 for the relevant three-year period is determined after the data on the Modified S&P 1000 becomes available (typically the summer after the three-year period ends). At that time, the performance shares earned are calculated and paid. The committee believes this performance share program provides a challenging level against which our performance is measured, as evidenced by the following table, which illustrates actual results of the return on capital matrix for each of the last several three-year periods:
Stock Options. The remaining half of each participants long-term incentive target award value is delivered in stock options. Stock options are granted annually from a committee-approved pool of
option shares. The pool of stock options available for issuance each year equals half the value of overall long-term incentive award value, divided by the Black-Scholes value of options for our common stock (not to be lower than 20% of the then-current market price of our common stock). This formulated pool of shares increases or decreases based on our trailing three-year total shareholder return (TSR) compared to the Modified S&P 1000, as follows:
We believe the Modified S&P 1000 represents our primary competition for investment capital, and therefore comprises an appropriate comparison group for performance purposes. We use TSR, which represents the increase in the fair market value of our common stock over the three-year period, including reinvestment of dividends, to tie executive rewards to our shareholders interests. The TSR calculation includes all dividends paid, consistent with the Performance Graph included in our Form 10-K. As with our performance share program described above, the committee believes that formulating the stock option pool this way heightens the challenging character of the compensation opportunities available to our executives. As the table below demonstrates, our stock option pool increased in size only once in the past five years:
The number of stock options granted to individual long-term incentive plan participants reflects the portion of the available pool represented by the individuals target award. The committee (or the CEO, in the case of non-officers) may increase or decrease the option grant for an individual by up to 25% from the target level, although that discretion has not been exercised.
We approve option awards at the first committee meeting each year. In 2009, the first committee meeting was January 22, 2009. At that meeting, the committee approved the granting of options effective on February 5, 2009, with an exercise price of $14.28 per share, the average of the high and low per share sales price of our common stock on the New York Stock Exchange on February 5, 2009. Whenever the first scheduled meeting has occurred before or near the time we release our year end earnings report, the committee has granted stock options:
The practice ensures that the exercise prices of stock options reflected all current information. Although we have no formal policy on granting options at a time when inside information may exist, the committee follows the procedure we describe above when necessary to ensure that option exercise prices reflect full disclosure of earnings information. We have not engaged in back dating of options, as our policies do not allow back dating. In addition, our option plans do not permit option grants with an exercise price below the fair market value of our stock on the effective date of the option grant.
Our CEO also has authority to grant a very limited number of options at other times during the year (no more than 50,000 total shares or 5,000 shares per employee), but may not grant options to anyone who is an officer within the definition of the rules under Section 16 of the Exchange Act, or back date any options. Consistent with the terms of our option plans, options granted by our CEO may not have an exercise price below the fair market value of our stock on the effective date of the option grant.
Other Compensation. The committee occasionally approves payments to an individual or group of employees to reflect special circumstances. Effective February 5, 2009, the committee granted special restricted stock units totaling 96,665, to four of the named executive officers and 15 other employees. Messrs. Fischer and Pain received grants for 13,333 shares each, and Messrs. McIntosh and McGough received grants for 6,667 shares each. The restricted stock units vest on the earlier of a change in control or the third anniversary of the grant date, if the individual remains an Olin employee until that date, and accrue dividend equivalents until vesting. The committee retains discretionary authority, as it does with all restricted stock awards, to waive conditions for vesting prior to the scheduled vesting date upon termination of employment. The committee currently intends to make similar restricted stock awards in 2010 to the same employees. These awards serve as a retention incentive for a key group of officers and employees and also reward their extraordinary efforts and contributions to our recent restructuring activities, including the sale of our Metals businesses and the acquisition and integration of Pioneer Companies, Inc.
We also offer a small number of other personal benefits to groups of employees. We provide some benefits, such as a portion of health insurance premiums and certain retirement benefits, to all salaried employees. Other items, such as certain life insurance benefits and the retirement and change in control benefits described below, are provided only to our NEOs and other senior managers. In addition, we provide automobile expenses and financial counseling services to some of our NEOs. We tie these benefits to competitive practices in the market, a practice the committee believes enables us to attract and retain executives with the talents and skill sets we require.
Retirement Benefits. We offer retirement benefits as part of the package to recruit and retain employees, as well as to contribute to financial security in post-employment years. Our retirement benefits also reflect an individuals contributions over his or her career with the company, as those benefits are based in part on the employees service. In general, we establish retirement benefits based on comparable programs offered by competitors. The committee believes nonqualified supplemental retirement plans like ours are commonly provided to executives at other companies, and offering these benefits helps us remain competitive for qualified senior-level executive talent. We periodically re-evaluate and update those plans to respond to changes in the market. For example, in 2005, we amended the Qualified Plan to eliminate participation for salaried employees hired on or after January 1, 2005, and as of December 31, 2007, we froze defined benefit pension accruals for salaried participants under the Qualified Plan, Supplemental Plan and Senior Plan. The following chart summarizes the benefits provided under our retirement plans for salaried employees:
The Supplemental CEOP, the Supplemental Plan and the Senior Plan are unfunded, nonqualified deferred compensation plans for the named executive officers and a select group of other senior management employees. Because each of these three plans is unfunded, participants receive benefits only if we have the financial resources to make the payments when due. The committee believes these nonqualified retirement supplements are commonly extended to executives at other companies, and by offering these benefits we remain competitive in the market for qualified senior-level executive talent. We describe the terms of our retirement plans in more detail in the narrative discussion following the table entitled Pension Benefits below.
Change in Control Agreements. We provide change in control agreements to our senior management to ensure that our executives work to secure the best outcome for shareholders in the event of a possible change in control, even if it means that they lose their jobs as a result. As a retention incentive, each of our senior executives also has an agreement that provides certain benefits if the executives employment is terminated without cause. These agreements are described in detail under the discussion following the Summary Compensation Table and under the caption Potential Payments Upon Termination or Change in Control.
The committee gives careful attention to all aspects of executive compensation and for the reasons discussed above remains confident that our executive compensation program satisfies our objectives.
Tax and Accounting Considerations
All elements of compensation, including salaries, generate charges to earnings under generally accepted accounting principles (GAAP). We generally do not adjust compensation based on accounting factors, but we consider the tax effect of various types of compensation. The committee considers the Code Section 162(m) limit on deductions for compensation over $1 million, and designs our stock options, the largest portion of our performance shares and our annual cash incentive to meet the exemption for performance-based compensation from this deductibility limit. It is possible, however, that portions of these awards will not qualify as performance-based compensation, and, when combined with salary and other compensation to a named executive officer, may exceed this limitation in any particular year.
The American Jobs Creation Act of 2004 changed tax rules applicable to nonqualified deferred compensation arrangements, and Olin intends to comply with such rules to the extent applicable.
On February 19, 2009, our board, at the recommendation of the committee, adopted a clawback policy that allows Olin to recover all or a portion of payments under the SMICP or the MICP and performance share awards from certain executives. To recover compensation, our board or the committee must determine that the executive was grossly negligent or engaged in intentional misconduct that was a significant contributing factor to:
An executive who participates in the SMICP or the MICP is subject to the clawback policy. Amounts that we recover will not be included in calculating that executives benefits under our Supplemental CEOP. Our recoupment of amounts under the policy does not constitute an event permitting the executive to trigger severance benefits under our severance agreements.
In addition to the clawback policy, our equity plans provide that if a participant in that plan renders service to one of our competitors, or discloses confidential information without our consent, or violates other terms of the plan, the committee may terminate any unvested, unpaid or deferred awards held by the participant, or may require the participant to forfeit benefits received under the plan within the six months before the participants action.
Our severance arrangements described below under Potential Payments Upon Termination or Change in Control provide that we will gross up the amount of excise tax due on excess golden parachute payments provisions under Code Section 280G. The committee considered this benefit in approving the terms of those agreements.
Stock Ownership Guidelines
We describe our stock ownership guidelines for directors under the heading Director Compensation below. Our stock ownership guidelines require executive officers and certain other senior managers to maintain specified ownership levels of our stock, based upon their positions. Under our current guidelines, our CEO is expected to attain stock ownership of at least 150,000 shares, and our other named executive officers are expected to hold at least 20,000 shares of our common stock.
We expect an executive to achieve the appropriate ownership level within five years. Our committee monitors compliance with the stock ownership guidelines annually. To determine stock ownership under the guidelines, we include, in addition to shares the individual owns outright, restricted stock and restricted stock units, shares held in the executives CEOP account, shares subject to vested stock options with an exercise price below the current market price and one-half of the total target performance share awards payable in stock. All of our named executive officers met these guidelines as of the end of 2008.
SUMMARY COMPENSATION TABLE
The table below summarizes the total compensation paid to or earned by each of the named executive officers for the fiscal years ended December 31, 2008, 2007 and 2006.
GRANTS OF PLAN-BASED AWARDS
Annually, we grant options to purchase shares of our common stock to a group of key employees, including our executive officers. We describe our stock option program in more detail above under the heading Compensation Discussion and AnalysisLong Term Incentive Compensation, and Stock Options. All options granted in 2008 were non-qualified options vesting in three equal annual installments beginning on the first anniversary of the grant date. The options generally may be exercised until ten years after the grant date (but the exercise period may end earlier based on the termination of the participants employment).
Under our option plans, the option exercise price must be at least equal to the average of the high and low sale prices of our common stock on the date of the grant. Our option plans specifically prohibit repricing, and, except for certain anti-dilution adjustments, other adjustments to the exercise price. We discuss the timing of our option grants above, under the heading Stock Options in the Compensation Discussion and Analysis section of this proxy statement and our policies do not permit any back dating of options. Our internal auditors completed an audit of our option grants in 2006 and confirmed that we had not engaged in any option back dating practices.
Each named executive officer and certain other key employees received a target number of performance shares in early 2008, which vest after the end of 2010. The total number of performance shares that vest may vary between 25% and 150% of the target number, based on our average annual return on capital for the three years ending December 31, 2010, in relation to the average annual return on capital among the Modified S&P 1000 for that period. The chart included in the discussion of performance share awards in the Compensation Disclosure and Analysis above sets forth this relationship in more detail. Vested performance shares are paid approximately half in cash and half in stock.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OPTION EXERCISES AND STOCK VESTED
The shares listed in column (d) above represent performance shares paid in the summer of 2008 (vested based on our performance for the three years ended December 31, 2007) under a performance share award made in early 2005. Performance shares are paid approximately half in cash and half in stock. The cash portion of the performance shares payment was based on the fair market value of the shares as of December 31, 2007 ($19.49), and dollar amounts listed in column (e) for the stock portion of the payment of performance shares are based on the average of the high and low sales prices for our common stock as of the date the shares were issued ($27.18), August 20, 2008. Of the total performance shares included in column (d) above, 25% vested automatically, and the remaining shares vested based on our average annual return on capital for the three-year period ended December 31, 2007, compared to that of the Modified S&P 1000. We describe our performance share program in more detail in our Compensation Disclosure and AnalysisElements of Compensation and in the text following the table entitled Grants of Plan-Based Awards.
The table below shows the present value of the benefits under each of the pension plans as of December 31, 2008 for each named executive officer. The present values are calculated using:
Please see the note entitled Pension Plans and Retirement Benefits in the notes to our audited financial statements included in our 2008 annual report on Form 10-K for a discussion of these assumptions.
The executive may elect payment of benefits under any of the available payment forms under these plans, including payments for the executives life (which we sometimes refer to as a single life annuity) or payments continuing after the executives death for the life of his or her spouse (which we refer to as a joint and survivorship benefit). Under the Qualified Plan and the Supplemental Plan, benefit payments are reduced from the single life annuity based on actuarial calculations if the executive elects a different payment form. The Senior Plan generally provides a 50% joint and survivorship benefit without any actuarial reduction, and also provides the executive with an additional amount equal to the amount of the actuarial reduction of benefits payable from the Qualified Plan and the Supplemental Plan for a 50% joint and survivorship benefit election. The following chart shows the present value of accrued benefits for each of the named executives under these plans, assuming the executive elected the 50% joint and survivorship benefit and retired at age 62, (the first age at which unreduced pension benefits are payable under the plans):
Freeze of Qualified Plan, Supplemental Plan and Senior Plan
As noted above, benefits accrued by salaried participants in the Qualified Plan, Supplemental Plan and Senior Plan were frozen effective December 31, 2007. Participants accrued benefits until December 31, 2007 based on applicable years of service and eligible compensation through that date. Service after December 31, 2007 will count toward meeting the eligibility requirements for commencing a pension benefit (including vesting and early retirement) under these plans, but not toward the calculation of the pension benefit amount. Compensation earned after 2007 will similarly not count toward the determination of the pension benefit amounts under these plans.
As part of a competitive benefits program and to contribute to employees financial security in retirement, we offer defined benefit retirement benefits to salaried employees hired before January 1, 2005 through our Qualified Plan. Benefits under the Qualified Plan are calculated based on the average cash compensation (salary and annual incentive) for the highest three years out of the last ten years the individual is employed by Olin, through December 31, 2007. The law requires that in determining eligible compensation, the Qualified Plan ignore compensation in excess of a legally-imposed cap (which for 2007, the last year of benefit accruals, was $225,000). An employees benefit is generally 1.5% of his or her average compensation during the relevant period multiplied by the number of years of service, less a percentage of his or her primary Social Security benefit based on years of service (not to exceed 50% of such Social Security benefit). Participants who are at least age 55 with at least 10 years of service when they leave Olin may elect to receive a benefit immediately that is reduced by 4% for each year the participant is younger than age 62 at the time benefit payments begin. Participants who leave Olin before age 55 (with 10 or more years of service) may elect to receive an actuarially reduced benefit with payments beginning at age 55 or later. Participants who leave Olin before age 65 with at least 5 years of service (but less than 10 years of service) receive a vested retirement benefit beginning the month after their 65th birthday. Benefits from the Qualified Plan generally are paid as an annuity with the form of payment (e.g. joint and survivorship benefit, guaranteed period, etc.) selected by the participant, subject to any applicable actuarial reductions.
The Supplemental Plan is an unfunded, nonqualified deferred compensation plan for management employees at specified compensation levels. The Code imposes limits on pension benefits payable from the Qualified Plan. Our Supplemental Plan restores these benefits to affected employees and provides benefits on certain compensation that has been deferred and excluded from eligible compensation under the Qualified Plan. The formula used to calculate pension benefits under the Supplemental Plan is the same as under the Qualified Plan, without the Code limitations on benefits and eligible compensation, reduced for the amount payable under the Qualified Plan. Early retirement benefits are payable at the later of termination or age 55 if a participant has at least 10 years of service. Such early retirement benefits use the same reduction factors as the Qualified Plan.
The Senior Plan is an unfunded, nonqualified deferred compensation plan for select management employees. An employee who is a Section 16(b) reporting officer, and who is selected by the committee, may participate in the Senior Plan. Under the Senior Plan, pension benefits are based on average eligible compensation for the three highest years out of the last ten that he or she is employed by Olin through December 31, 2007. Compensation is not subject to the Code and other limitations that apply under the Qualified Plan. Benefits generally equal 3% of the executives average compensation multiplied by the number of years of participation in the Senior Plan, plus 1.5% of the executives average compensation for years of service in the Qualified Plan and Supplemental Plan less years of
service in the Senior Plan, reduced by the pension benefits accrued under the Qualified Plan and the Supplemental Plan. Benefits are further reduced by 50% of the employees primary Social Security benefit.
Early retirement benefits are payable on an immediate basis to a participant whose employment terminates at age 55 or later, regardless of years of service, but are reduced by 4% per year for each year they begin before age 62. The maximum benefit payable from the Senior Plan is 50% of the employees average compensation reduced by amounts payable from the Qualified and Supplemental Plans, 50% of the employees primary Social Security benefit, and certain other adjustments set forth in the plan documents, if applicable. The Senior Plan provides a joint and survivorship benefit to an executives surviving spouse generally equal to 50% of the executives benefits from the Senior Plan. In addition, the Senior Plan pension benefits are increased by the amount of the actuarial reduction to benefits under the Qualified and Supplemental Plans if the executive elects the 50% joint and survivorship option under those plans.
The executive may elect any of the forms of payment available under the Senior Plan and Supplemental Plan, including a lump sum payment or the annuity form of payment.
If a participant in the Senior Plan and Supplemental Plan is a specified employee as defined in Code Section 409A, benefits payable upon termination of employment may not be paid in the first six months after retirement, but the first six months of benefits will be paid in a lump sum as soon as practicable thereafter.
Health Insurance and Death Benefits
In general, salaried employees who retire at age 55 or later with at least 10 years of service may elect to continue to be covered under our health plan until age 65 by paying at least the same premium as active salaried employees. When the average per capita cost for our health plan retirees exceeds $10,000, as it did in 2007, the retiree also must pay the amount by which our average per capita cost for the health plan retirees exceeds $10,000. On the first day of the month in which they become 65, salaried retirees who retired after age 55 with 10 or more years of service are eligible for a Medicare supplemental health care plan. We contribute $20 per covered person per month toward the cost of that plan, but make no contributions if a retiree chooses to participate in another plan.
In general, salaried employees who retire from Olin at age 55 or later with at least 10 years of service are eligible for a $5,000 death benefit from the Qualified Plan. In addition, full-time employees with job responsibilities at a specified level (based on Hay Points) may retain a percentage of their life insurance coverage when they retire, based on age at retirement, with Olin paying the premiums.
NONQUALIFIED DEFERRED COMPENSATION
The following table sets forth information with respect to our Supplemental CEOP for each of our named executive officers for 2008:
In addition to our CEOP, discussed above under the heading Compensation Discussion & AnalysisElements of CompensationRetirement Benefits, our Supplemental CEOP provides deferral and company matching opportunities to employees whose contributions to the CEOP are limited under the Code because their base pay exceeds the Codes compensation limit ($230,000 for 2008). These employees can make pre-tax contributions to the Supplemental CEOP after their eligible compensation reaches the Code limit. For these purposes, eligible compensation generally includes base compensation but excludes incentive compensation. Employees who contribute to the Supplemental CEOP receive matching contribution credits from Olin at the same level Olin matches CEOP contributions. In addition, beginning in 2008 in connection with the pension plan freeze, Olin provides the same retirement contribution credits at the same level as under the CEOP (5% or 7.5%, depending on the employees age) on the amount of the excess eligible compensation to the Supplemental CEOP. For these purposes, eligible compensation generally includes base compensation and short-term incentive compensation but excludes long-term incentive compensation.
Employees elect to have their contributions to the Supplemental CEOP invested in phantom shares of Olin common stock or phantom units in an interest bearing fund. Dividends are credited to the phantom stock account based on the dividend rate paid on shares of our common stock. Interest is credited to the phantom interest bearing fund at a rate determined quarterly equal to (i) the Federal Reserve A1/P1 Composite rate for 90-day commercial paper plus 10 basis points at the end of the last quarter, or (ii) such other rate as our Board or compensation committee (or any delegate thereof) select in advance from time to time.
Distributions are paid in cash, in a lump sum or in annual installments for up to fifteen (15) years after retirement, at the employees election. Our phantom shares of common stock are valued at the average daily closing prices of our common stock on the New York Stock Exchange for the month before the distribution. Distributions from the interest bearing fund equal the dollar value of the participants account (principal and interest). If a participant in the Supplemental CEOP is a specified employee as defined in Code Section 409A, benefit payments payable upon termination of employment may not be paid in the first six months after retirement.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Certain agreements with our named executive officers provide compensation in the event of a termination of employment or a change in control of Olin. The tables below show estimated compensation payable to each named executive officer upon various triggering events. Actual amounts can only be determined upon the triggering event.
Annual Payments Assuming Election for Life of Executive
Payments Upon Death or Disability
Upon the death of a former executive, unless the executive elects to receive the cash value of his or her life insurance at retirement, his or her estate receives life insurance benefits provided the former executive was at least age 55 when employment terminated. The amount of life insurance is based on the executives age and base salary at the time of termination of employment. As of December 31, 2008, Mr. Rupp would have $172,000, Mr. Pain would have $57,000, and Mr. McGough would have $72,500, of life insurance coverage. Messrs. Fischer and McIntosh are not eligible for these life insurance benefits until they attain age 55.
An executive whose employment terminates in connection with a disability would receive disability benefits equal to 60% of base salary until the executive is no longer disabled, reaches age 65, or elects to take early retirement benefits. At that time, the executive would receive the applicable retirement benefits described above. Messrs. Rupp, McIntosh, Pain and McGough have elected to pay additional premiums to increase their disability coverage to 75% of base salary. Mr. Fischer has elected the 60% level of coverage.
Executive Severance and Executive Change in Control Agreements
We have executive severance agreements (executive agreements) and executive change in control agreements (CIC agreements) with all of the named executive officers, and with three other executive officers. These agreements extend until January 26, 2012, and extend by an additional year on each January 26th, unless we provide at least 90 days notice that the term will not be extended. If a change in control (as defined in the CIC agreement) occurs, the CIC agreement extends for at least three years after the change in control. The committee established the terms of the CIC agreements and the executive agreements (including the level of payments in various scenarios) based on advice from Exequity and from outside benefits counsel regarding marketplace practices for comparable companies.
CIC Agreement. The CIC agreement contains an extensive definition of change in control, but generally a change in control occurs if:
(1) a person or entity acquires control of 20% or more of our common stock unless (a) the acquiring party is Olin, its subsidiaries or benefit plans, an underwriter holding the shares temporarily for an offering, the executive who is a party to the CIC agreement or an entity that the executive controls or (b) the percentage increase occurs solely because the total number of shares outstanding is reduced by Olin buying its stock back;
(2) a majority of our board members change (other than new members elected or nominated by at least 2/3 of the then-current board, absent an election contest or similar dispute);
(3) we (or any of our subsidiaries) sell all or substantially all assets, or merge or engage in a similar transaction, unless our shareholders own more than half of the voting interest of Olin or the new company (in approximately the current ratios) after the transaction, and neither of the events in items (1) and (2) above has occurred for Olin or the new entity; or
(4) our shareholders approve a plan of complete liquidation or dissolution of Olin.
If, after a change in control, the executives employment is terminated by Olin without cause or by the executive as a result of disability or adverse changes in the terms of employment, the executive will:
These payments and benefits are not conditioned on any waiver, release or noncompete. The CIC agreement also provides that if any payments made to the executive subject the executive to the excise tax under Section 4999 of the Code, the payment increases to provide the executive with a net payment as if such tax did not apply.
Executive Agreement. If the executives employment is terminated (in a non change in control event) by Olin without cause, the executive will receive, in lieu of severance benefits under any other Olin severance plans or programs:
The executive must sign a waiver and general release of claims and agree to one-year noncompetition and nonsolicitation covenants to receive any severance payments and other benefits.
If, in connection with the sale or transfer of an Olin business or assets to a third party or to a joint venture, the executive becomes an employee of the buyer or joint venture, the executive agreement continues to apply to any termination from the new employment for twelve months. Payments by Olin are reduced for any cash severance or similar benefits from such buyer or joint venture.
Treatment of Equity Awards
Retirement. When an employee retires:
The committee has discretion to waive vesting periods for restricted stock and restricted stock units.
Change in Control. On a change in control (as defined under the CIC agreement or applicable award):
Qualified Plan. The Qualified Plan provides that if, within three years after a change in control (as defined in the Qualified Plan), any corporate action is taken or filing made in contemplation of events such as a plan termination or merger or other transfer of assets or liabilities of the plan, and such event later takes place, plan benefits automatically increase to absorb any surplus plan assets. Under the Qualified Plan, a change in control occurs if:
Supplemental Plan. In the event of a change in control (as defined in the Supplemental Plan), we will pay each eligible employee a cash amount sufficient to purchase an annuity that provides the monthly after tax benefit the employee would have received under the Supplemental Plan (based on benefits accrued as of the change in control). The Supplemental Plan defines a change in control in a manner compliant with Code Section 409A.
Senior Plan. In the event of a change in control (as defined in the Supplemental Plan), the Senior Plan pays qualified executives a cash amount sufficient to purchase an annuity that provides the after-tax benefit the employee would have received under the Senior Plan (based on benefits accrued as of the change in control).
In 2008, our compensation package for non-employee directors consisted of:
The table below shows all cash and stock retainers, meeting fees and other compensation we paid to each of our non-employee directors during 2008. Each of the directors listed below served for the entire year, other than Ms. Kamsky who resigned effective April 24, 2008, Mr. Ruggiero, who resigned effective June 30, 2008, and Mr. Smith, who was elected to the Board effective August 21, 2008.
Differences in the amounts shown above among Board members for dividend equivalents reflect the number of shares held as deferred stock units. Messrs. Bunch, OConnor, Ruggiero and Schulz elected to receive their dividend equivalents in the form of additional deferred stock units, while the other directors elected to receive the dividend equivalent payments in cash (current or deferred). Does not include perquisites and other personal benefits which did not exceed, in the aggregate, $10,000 for any director.
In addition to the directors listed above, on December 11, 2008, the board elected Gray G. Benoist as a member of the board effective February 19, 2009, and he received no compensation during 2008.
The board of directors determines the total amounts of the annual retainer, meeting, lead director and board/committee chair fees, based on recommendations from the committee and input from Exequity. All stock-based compensation for our directors is governed by our Amended and Restated 1997 Stock Plan for Non-employee Directors, which we refer to as our Directors Plan.
The Directors Plan was modified at the end of 2008 to better coordinate timing of the payment of the annual stock grant, retainer stock grant and cash retainer with the terms of the directors. The payments for 2009 and later years will be shifted from a calendar year basis to a director year12-month period running from May 1 to April 30. The first director year will be May 1, 2009 through April 30, 2010. The payments will be made on the second Thursday in May, after Olins annual shareholder meeting in April. In prior years, these payments were made on the second Thursday in February. Because this shift in payment date leaves a gap in compensation coverage for the period from January 1, 2009 through April 30, 2009, the Directors Plan provides for one-time pro-rata grants in February of 2009 of $5,000 in cash plus two awards of Olin common stock:
Under the Directors Plan, directors may choose to receive common stock instead of cash for any portion of their compensation. Directors may also elect to defer payments (cash or stock). We credit their deferred accounts with quarterly interest (on the cash portion) and with dividend equivalents (on the phantom stock portion). Phantom stock units are paid out in shares of our common stock or, at the directors election, in cash. We also pay the balance of any deferred account to the director if there is a change in controlgenerally if:
Two directors held shares of Olin common stock in their deferred accounts under the Directors Plan at the time of the spin-off of Arch Chemicals, Inc. on February 8, 1999. Those directors received phantom shares of common stock of Arch Chemicals, Inc. as a dividend distribution in connection with the spin-off. The Arch Chemicals, Inc. phantom shares are payable only in cash, unless a director transfers the Arch Chemicals, Inc. phantom shares into his Olin common stock account before he leaves our board.
We have stock ownership guidelines for our non-employee directors that require each such director to own shares of our common stock with a market value of at least five times the amount of the annual retainer, within five years after the director joins our board. Each non-employee director currently meets the guidelines, or, in the case of directors who joined the board in the past five years, are expected to meet the guidelines in a timely manner.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on the review and discussions, recommends that it be included in Olins annual report on Form 10-K and Proxy Statement for the 2009 Annual Shareholder Meeting.
Richard M. Rompala, Chairman
Donald W. Bogus
C. Robert Bunch
Randall W. Larrimore
Vincent J. Smith
February 18, 2009
ITEM 2PROPOSAL TO APPROVE 2009 LONG TERM INCENTIVE PLAN
The board of directors proposes that the shareholders approve the Olin Corporation 2009 Long Term Incentive Plan, or 2009 LTIP, as adopted by the board on February 19, 2009.
The principal features of the 2009 LTIP are summarized below. The summary is not intended to be a complete description of the 2009 LTIP, and you should review the entire 2009 LTIP, a copy of which is included in this Proxy Statement as Appendix A.
General Nature and Purpose
The principal purposes of the 2009 LTIP are to (a) attract and retain employees, (b) provide competitive compensation packages to participants, (c) motivate participants to achieve long-range goals, and (d) further align participants interests with those of Olins shareholders.
Under the 2009 LTIP, a maximum of 3,000,000 shares of Olin common stock, referred to as common stock in this summary, is authorized for issuance upon exercise or granting of options, stock appreciation rights (SARs), restricted stock, restricted stock units, performance shares and other stock-based awards (collectively, awards). In addition, a maximum of 1,500,000 shares may be full value awards (restricted stock, restricted stock units, performance shares and other full value stock-based awards). As of January 31, 2009, there were approximately thirty employees who would be eligible to participate in the 2009 LTIP.
Section 162(m) of the Code denies the deduction for certain compensation in excess of $1 million per year paid by a public company to the Chief Executive Officer and the four highest compensated officers other than the CEO. Certain types of compensation, including compensation based on performance measures, are excluded from this deduction limit. In order for compensation to qualify for this exception, among other things, (i) the compensation plan must provide for a limit on the compensation to be paid to each executive and (ii) the performance measures must be disclosed to and approved by shareholders in a separate vote prior to payment. As discussed below, the 2009 LTIP provides for limits on the amount of awards to be paid to any participant.
The 2009 LTIP provides that awards designated by the committee as being performance-based shall have as performance measures one or more of the following:
EVA is a registered trademark of Stern Stewart & Company.
The board designated the compensation committee to administer the 2009 LTIP. The committee has full power to interpret the 2009 LTIP, including to determine eligibility for awards, and to adopt rules, forms and guidelines under the 2009 LTIP. Each member of the committee must be (i) a non-employee director for purposes of Rule 16b-3 under the Exchange Act (Rule 16b-3), (ii) an outside director for purposes of Section 162(m) of the Code, and (iii) independent under the New York Stock Exchange listing criteria. The full board also may elect to take any action under the 2009 LTIP that would otherwise be the responsibility of the committee. The committee may delegate partial or full authority to one or more members of Olins management under the 2009 LTIP, with respect to eligible employees who are not officers for purposes of Section 16(b) of the Exchange Act.
Subject to the terms and conditions of the 2009 LTIP, the committee has the authority to select the employees to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take other actions necessary or advisable for the administration of the 2009 LTIP (other than to reprice outstanding options). The committee may at any time suspend or terminate the 2009 LTIP. Shareholder approval is required to reprice options. Shareholder approval is also required to increase the maximum number of shares subject to awards or other award limits or to reduce the minimum option exercise price, except that the committee is allowed to make appropriate proportionate adjustments for stock dividends, stock splits or similar events as allowed in Section 4(b) of the 2009 LTIP.
Awards under the 2009 LTIP may be granted to employees of Olin (or any current or future subsidiaries) selected by the committee for participation in the 2009 LTIP.
The 2009 LTIP provides that the committee will specify the type, terms and conditions of the award. Each award may be set forth in a separate agreement with the person receiving the award.
The 2009 LTIP provides that
Shares exchanged or withheld to pay the purchase or exercise price of an award (including shares withheld to satisfy the exercise price of a stock appreciation right settled in stock) or to satisfy tax withholding obligations count against the numerical limits.
The 2009 LTIP allows for grants of options, or the right to purchase common stock at a specified price. Options may be non-qualified stock options (NQSOs) or Incentive Stock Options (ISOs). No option exercise price may be less than the fair market value on the date of grant, which, unless the committee determines otherwise, is the closing price of Olin stock on such date. The closing price of Olin stock as of February 27, 2009 was $10.44. The option will become exercisable (at the discretion of the committee) in one or more installments on or after the grant date, subject to the participants continued employment with Olin.
ISOs will be designed to comply with certain restrictions contained in the Code. ISOs may be subsequently modified to disqualify them from treatment as ISOs. In the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of stock of Olin, the exercise price must be at least 110% of the fair market value of a share of common stock on the date of grant, and the ISO must expire no later than the fifth anniversary of the date of its grant.
Restricted stock refers to stock that is subject to risk of forfeiture or other restrictions as the committee determines. Such restrictions will lapse under such circumstances as the committee may determine, including upon the achievement of performance criteria referred to above. In general, restricted stock may not be sold, or otherwise transferred or hypothecated, until the restrictions (if any) are removed or expire. Recipients of restricted stock may have voting rights and receive dividends paid with respect to such stock prior to the time when the restrictions lapse, as determined by the committee.
A restricted stock unit entitles the holder to receive shares of common stock or cash at the end of a specified deferral period but does not entitle the holder to any voting rights. If the committee determines, holders of unvested restricted stock units may receive dividends or dividend equivalent payments.
The committee may issue shares of restricted stock or restricted stock units up to an aggregate 5% of the total number of shares available for issuance under this plan without any minimum vesting period. Grants of restricted stock and restricted stock units above that level must include a minimum one-year vesting period for performance-based grants and a minimum three-year vesting period for grants without any performance-based component.
Performance shares provide for future issuance of shares to the recipient upon the attainment of corporate performance goals established by the committee over specified performance periods. Prior
to payment of performance shares the committee will certify that the performance objectives were satisfied. Performance objectives may vary from individual to individual and will be based upon one or more performance criteria the committee may deem appropriate, including the criteria described above.
SARs may be granted in connection with stock options or separately, and are payable in cash. The term of a SAR may not exceed ten years. A SAR entitles the holder to receive with respect to each share subject to the SAR, an amount equal to the excess of the fair market value of one share of common stock on the date of exercise over the exercise price of the SAR set by the committee as of the date of grant. Except as required by Section 162(m), there are no restrictions specified in the 2009 LTIP on the amount of gain realizable from the exercise of SARs, although restrictions may be imposed by the committee.
Dividend equivalents represent the value of any dividends per share paid by Olin, calculated with reference to the number of shares covered by the awards held by the participant. This value is converted into cash or additional shares of common stock, as determined by the committee. Payment may be made concurrently with actual dividend payments or may be deferred, at the election of the committee.
The committee may make other stock-based awards in such amounts and subject to such terms and conditions as the committee shall determine.
Method of Exercise. To exercise an option, the optionee must deliver to Olin a notice of exercise and full payment for the shares. The option price may be paid in cash, or by tendering shares of common stock already issued or issuable upon exercise of the option or by any other form of payment, which is approved by the committee and is consistent with the 2009 LTIP and applicable law, or by any combination of the above.
Termination of Employment. Awards terminate upon termination of the participants employment by Olin for cause or by the employee without Olins written consent. Vested options held at the time an optionees employment terminates for any other reason (excluding retirement) may be exercised for three months after termination, or such longer period as the committee provides. Vested options held at the time an optionees employment terminates due to retirement may be exercised at any time until the expiration date of the option, or such shorter period as the committee provides at the time of the termination. In no event, however, can an option be extended beyond the expiration date.
Non-Compete. If a participant renders service to a competitor of Olin, or discloses confidential information without Olins consent, or violates other terms of the 2009 LTIP, generally the committee may terminate any unvested, unpaid or deferred awards held by the participant, or may require the participant to forfeit benefits received under the 2009 LTIP within the six months prior to such action.
Non-Transferability. Options may be transferred only by will or by the laws of descent and distribution, and during a participants lifetime are exercisable only by the participant. However, the committee may in its discretion permit transfers by gift to a member of the holders family members or related entities or pursuant to certain domestic relations orders.
Acceleration of Awards. The vesting of awards will be accelerated in the event of a Change in Control of Olin. A Change in Control occurs if:
If a participant in the 2009 LTIP is subject to excise tax on any benefits or payments received under the 2009 LTIP as a result of the parachute tax provisions of the Code, Olin will compensate him or her for such excise tax unless a compensating payment for excise tax on benefits under the 2009 LTIP is made under another benefit or employment plan or agreement.
ERISA. The 2009 LTIP is neither a qualified pension, profit sharing or stock bonus plan under Section 401(a) of the Code nor an employee benefit plan subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended.
Adjustments Upon Change in Capitalization. If the outstanding shares of common stock are changed into or exchanged for a different number or kind of shares of Olin or other securities of Olin by reason of merger, consolidation, recapitalization, stock split, stock dividend, combination or exchange of shares, split-up, split-off, spin-off or other similar change in capitalization or any distribution to shareholders other than cash dividends, the committee will make an appropriate and equitable adjustment in the number, kind and prices of shares as to which all outstanding awards will be awarded, including adjustments to the limitations on the maximum number and kind of shares subject to the award limits.
Changes from 2006 LTIP. The 2009 LTIP is modeled after our current 2006 LTIP, approved by shareholders at the 2006 annual meeting. Changes from the 2006 LTIP include:
Benefits Under 2009 LTIP
No awards have been granted under the 2009 LTIP, so that benefits accruing pursuant to the 2009 LTIP are not presently determinable.
Federal Income Tax Consequences
We believe that under present law, the following discussion summarizes the U.S. federal income tax consequences generally arising with respect to awards under the 2009 LTIP.
Stock Options. The grant of a NQSO is not a taxable event either for the optionee or for Olin. Upon exercise of a NQSO, the optionee will recognize ordinary income in an amount equal to the excess of the fair market value of the shares of common stock acquired upon exercise, determined at the date of exercise, over the exercise price of such option. Olin will be entitled to a business expense deduction equal to such amount.
An optionee recognizes no taxable income upon the grant or exercise of an ISO, although payment of the option price with shares of common stock may result in taxable income on the transfer of the shares. The payment in shares will not affect the favorable tax treatment of the common stock received as a result of exercising the option. If an optionee meets the various holding period requirements, any gain or loss on the subsequent disposition of such common stock will be taxed to the optionee as long-term capital gain or loss. To the extent that an optionee recognizes ordinary income by reason of failing to meet those requirements, Olin will be entitled to a corresponding business expense deduction.
Restricted Stock and Restricted Stock Units. A holder of restricted stock generally will recognize ordinary income in an amount equal to the fair market value of the common stock upon lapse of the restrictions. A holder of restricted stock units generally will recognize ordinary income in an amount equal to the fair market value of the common stock upon issuance of the shares (or upon receipt of the cash payment, in amount equal to the cash payment, if the restricted stock units are settled in cash). Subject to Section 162(m), Olin is entitled to a business expense deduction that corresponds to the amount of ordinary income recognized by the holder.
Stock Appreciation Rights. Generally, the holder of a stock appreciation right recognizes no income upon the grant of a SAR. Upon exercise, the holder will recognize as ordinary income the excess of the value of the SAR on the date of exercise over the value as of the date of grant. Olin is entitled to a business expense deduction that corresponds to the amount of ordinary income recognized by the holder.
Dividend Equivalents and Deferred Payments of Restricted Stock. In general, dividend equivalents and deferred payments of restricted stock are taxable upon receipt. Subject to Section 162(m), Olin is entitled to a business expense deduction that corresponds to the amount of ordinary income recognized by the recipient.
Payment of Withholding Taxes
Olin may withhold, or require a participant to remit to Olin, an amount sufficient to satisfy any federal, state or local withholding tax requirements associated with awards under the 2009 LTIP. Recipients of awards may elect, subject to the approval of the committee, to satisfy the withholding requirement by having Olin withhold shares.
Vote Required for Approval
The affirmative vote of the holders of a majority of the votes cast on this proposal, provided that the total votes cast on the proposal represent over 50% of the outstanding shares of Olin common stock, is required to approve the adoption of the 2009 LTIP. Unless otherwise instructed, proxies will be voted FOR approval of adoption of the 2009 LTIP. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Under applicable NYSE rules, abstentions and broker non-votes will be counted as being entitled to vote on the proposal to approve the 2009 LTIP. Abstentions will be treated as votes cast on this proposal, but broker non-votes will not be treated as votes cast on this proposal. As a result, broker non-votes will have no effect on the proposal to approve the 2009 LTIP, provided that the total vote cast on this proposal represents over 50% of the number of shares entitled to vote on this proposal. Abstentions will have the same effect as a vote against the proposal to approve the 2009 LTIP.
The board recommends a vote FOR approval of the 2009 Long Term Incentive Plan.
Equity Compensation Plan Information
ITEM 3PROPOSAL TO RATIFY APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP was our independent registered public accounting firm for 2008 and 2007. A summary of the KPMG fees by year follows:
Our audit committee has a policy that all audit services by any independent registered public accounting firm and all non-audit services performed by our independent registered public accounting firm are subject to pre-approval by the audit committee at each scheduled meeting. The policy includes specific procedures for approval of such services. Excerpts from this policy follow:
Olins audit committee is solely responsible for pre-approving all audit services by any independent registered public accounting firm and all non-audit services performed by Olins independent registered public accounting firm. The process for such approval is as follows:
In 2008, the audit committee pre-approved all audit and audit-related services.
Who has the audit committee selected as Olins independent registered public accounting firm for 2009?
Olins audit committee is solely responsible for hiring and compensating the Companys independent registered public accounting firm. After considering KPMGs 2008 performance and their proposed audit plan for 2009, the committee has selected KPMG as our independent registered public accounting firm for 2009.
Is a shareholder vote required to approve Olins independent registered public accounting firm?
Neither Virginia law nor our Bylaws require us to submit this matter to the shareholders at the annual meeting. However, the board and audit committee chose to submit it to the shareholders to ascertain their views.
Will I have an opportunity to hear from KPMG and ask them questions?
We expect representatives of KPMG to be present at the annual meeting. They will have an opportunity to make a statement, if they desire to do so, and to respond to appropriate questions.
How many votes are required to ratify the appointment of KPMG as Olins independent registered public accounting firm for 2009?
To ratify the appointment of KPMG as Olins independent registered public accounting firm for 2009, the votes cast in favor of this proposal must exceed the votes cast in opposition to this proposal. Abstentions and shares held in street name that are not voted on this proposal will not be included in determining the number of votes cast on this proposal and will not affect the vote on this proposal. If the shareholders ratification vote does not support the audit committees decision to appoint KPMG as Olins independent registered public accounting firm for 2009, the audit committee will take the vote into consideration in making next years selection.
How does the board recommend we vote?
The board recommends that you vote FOR ratification of the appointment of KPMG as our independent registered public accounting firm for 2009.
2009 LONG TERM INCENTIVE PLAN
Section 1. Purpose.
The general purposes of the Olin Corporation 2009 Long Term Incentive Plan are to (i) attract and retain persons eligible to participate in the Plan; (ii) motivate Participants, by means of appropriate incentives, to achieve long-range goals; (iii) provide incentive compensation opportunities that are competitive with those of other similar companies; and (iv) further align Participants interests with those of other shareholders of Olin Corporation through compensation that is based on Olins common stock; and thereby promote the long-term financial interest of Olin and its Affiliates, including growth in the value of Olins equity and enhancement of long-term shareholder return.
Section 2. Definitions.
As used in the Plan:
(a) Accounting Firm means KPMG LLP or such other nationally recognized certified public accounting firm as may be designated by the Participant.
(b) Affiliate means any corporation, partnership, joint venture or other entity during any period in which Olin owns, directly or indirectly, at least 50% of the total voting or profits interest.
(c) Award means any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Share, Other Stock-Based Award or Dividend Equivalent granted under the Plan.
(d) Award Agreement means any written or electronic agreement or other instrument or document evidencing an Award granted under the Plan, regardless of whether a Participant signature is required.
(e) Board means the Board of Directors of Olin.
(f) Change in Control means the occurrence of any of the following events:
(i) the Incumbent Directors cease for any reason to constitute at least a majority of the Board; or
(ii) any person (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a beneficial owner (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Olin representing 20% or more of the combined voting power of the Olin Voting Securities; provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control if such event results from any of the following: (A) the acquisition of Olin Voting Securities by Olin or any of its subsidiaries, (B) the acquisition of Olin Voting Securities by any employee benefit plan (or related trust) sponsored or maintained by Olin or any of its subsidiaries, (C) the acquisition of Olin Voting Securities by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) the acquisition of Olin Voting Securities pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) the acquisition of Olin Voting Securities by the Participant or any group of persons including the Participant (or any entity controlled by Participant or any group of persons including the Participant); or