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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
For the fiscal year ended May 31, 1994
OR
[] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the transition period from __________ to ___________
Commission File No. 0-5132
RPM, INC.
(Exact Name of Registrant as Specified in its Charter)
Ohio 34-6550857
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(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) No.)
P.O. Box 777, 2628 Pearl Road, Medina, Ohio 44258
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (216)273-5090
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, Without Par Value
--------------------------------
(Title of Class)
Liquid Yield Option(TM) Notes Due 2012
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to the
filing requirements for the past 90 days. Yes x No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
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As of August 19, 1994, 56,772,256 Common Shares were outstanding, and the
aggregate market value of the Common Shares of the registrant held by
non-affiliates (based upon the closing price of the Common Shares as reported
on the NASDAQ National Market System on August 19, 1994) was approximately
$971,729,098. For purposes of this information, the 2,409,789 outstanding
Common Shares which were owned beneficially as of August 19, 1994 by executive
officers and Directors of the registrant were deemed to be the Common Shares
held by affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement to be used in
connection with its Annual Meeting of Shareholders to be held on October 10,
1994 are incorporated by reference into Part III of this Form 10-K.
Except as otherwise stated, the information contained in this Annual Report
on Form 10-K is as of May 31, 1994.
_______________
(TM)Merrill Lynch & Co., Inc.
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PART I
ITEM 1. BUSINESS.
THE COMPANY
RPM, Inc. ("RPM" or the "Company") was organized in 1947 as an Ohio
corporation under the name Republic Powdered Metals, Inc. On November 9, 1971,
the Company's name was changed to RPM, Inc. As used herein, the terms "RPM"
and the "Company" refer to RPM, Inc. and its subsidiaries, unless the context
indicates otherwise. The Company has its principal executive offices at 2628
Pearl Road, P.O. Box 777, Medina, Ohio 44258, and its telephone number is (216)
273-5090.
RECENT DEVELOPMENTS
Since RPM's offering of Common Shares to the public in September 1969, the
Company has made a number of significant acquisitions that have been described
in previous reports on file with the Securities and Exchange Commission. RPM's
acquisition strategy focuses on companies with high performance and quality
products which are leaders in their respective markets. Part of RPM's
acquisition strategy is to locate companies with products that can also be
distributed through existing operating companies. RPM expects to continue its
acquisition program, although there is no assurance that any acquisitions will
be made.
As part of this acquisition program, on June 8, 1993 the Company acquired
all of the outstanding shares of Dynatron/Bondo Corporation, a manufacturer and
marketer of auto and marine body filler and related products, and on October
26, 1993 the Company acquired all of the outstanding shares of Stonhard, Inc.,
a manufacturer and marketer of polymer-based floorings, linings and
construction products for applications in industrial and commercial markets.
In addition, on June 28, 1994 the Company acquired all of the outstanding
shares of Rust-Oleum Corporation, a manufacturer and marketer of protective
coatings and specialty chemicals, including consumer rust-preventative
coatings. In 1991 the Company had acquired the European operations of
Rust-Oleum and, thus, the Company now owns all of Rust-Oleum.
On June 23, 1994 the Company entered into a $300 million three-year
revolving credit facility with National City Bank and The First National Bank
of Chicago, as Co-Agents, and The Chase Manhattan Bank (National Association),
as Administrative Agent (the "Credit Facility"). In connection therewith, the
Company's existing credit facility with a group of banks was terminated and all
amounts outstanding thereunder totalling approximately $47 million were repaid
pursuant to an advance under the Credit Facility. In addition, the Company
utilized a $176.5 million advance under the Credit Facility to pay for the
Rust-Oleum
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Corporation acquisition. As of August 19, 1994, there was approximately $233
million of principal advanced under the Credit Facility. There have not been
any other material changes or developments since June 1, 1994 in the business
done or intended to be done by the Company.
BUSINESS
RPM operates principally in one business segment, the manufacture and
marketing of protective coatings. These protective coatings products are used
for both industrial and consumer applications. For industrial applications,
RPM manufactures and markets coatings for waterproofing and general
maintenance, corrosion control, and other specialty chemical applications. For
consumer applications, RPM manufactures do-it-yourself products for the home
maintenance, automotive repair, and consumer hobby and leisure markets. RPM,
through its operating companies, serves niche markets within these broader
categories, thus providing a foundation for its strategy of growth through
product line extensions.
The protective coating products manufactured by RPM are used primarily on
property which already exists. RPM is not involved to any great degree in new
construction and, therefore, is generally less affected by cyclical movements
in the economy. RPM markets its products in approximately 110 countries and
operates manufacturing facilities in 45 locations in the United States,
Belgium, Canada, Luxembourg and The Netherlands.
INDUSTRIAL MARKETS AND PRODUCTS
WATERPROOFING AND GENERAL MAINTENANCE. Waterproofing and general
maintenance constitute RPM's original marketplace, having been served by
Republic Powdered Metals, Inc. since the Company's founding. Operating
companies and products include: REPUBLIC POWDERED METALS--heavy-duty protective
coatings and single-ply roofing systems; RPM NETHERLANDS B.V.--coatings for
industrial routine maintenance; MAMECO INTERNATIONAL--sealants, deck coatings
and membranes; MARTIN MATHYS--water-based coatings for commercial and
industrial maintenance; and STONHARD -- high-performance polymer floors,
linings and wall systems.
CORROSION CONTROL. RPM's CARBOLINE manufactures high-performance
corrosion-resistant protective coatings, fireproofing, tank linings and floor
coatings, and markets these products to industrial, architectural and
applicator companies throughout the world. WISCONSIN PROTECTIVE COATINGS
manufactures a complete line of liquid-applied, corrosion-resistant coatings
used for extremely harsh environments, such as rail cars, tank linings, and
smoke stacks.
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SPECIALTY CHEMICALS. RPM's specialty chemicals businesses address selected
niche markets within this broad industry category. Specialty chemical
companies and products include: DAY-GLO COLOR--fluorescent colorants and
pigments; MOHAWK FINISHING PRODUCTS--furniture repair, cleaning and polishing
products; ALOX--chemical additives used as rust preventatives, corrosion
inhibitors, special lubricants and metal working compounds; CHEMICAL
SPECIALTIES--chemicals used for cleaning carpet, upholstery and fabric wall
covering, and chemicals used in smoke and fire restoration cleanup; and
AMERICAN EMULSIONS--dye additives for textile dyeing and finishing, and water
treatment products for the paper industry.
CONSUMER MARKETS AND PRODUCTS
CONSUMER HOBBY AND LEISURE. The hobby and leisure marketplace is served by
TESTOR, America's largest producer and marketer of model paints and accessory
items to the hobby and model market, CRAFT HOUSE, producer of Paint-by-Numbers
sets, basic preschool activity sets, crafts and hobby products, and
FLOQUIL/POLY S COLOR, manufacturer of hobby, art and craft coatings. RPM's
consumer hobby and leisure products are marketed through thousands of mass
merchandise, toy and hobby stores throughout North America.
CONSUMER DO-IT-YOURSELF. RPM's six primary consumer do-it-yourself
businesses are RUST-OLEUM, WM. ZINSSER, KOP-COAT, BONDEX INTERNATIONAL,
DYNATRON/BONDO and TALSOL. RUST-OLEUM manufactures high-quality
corrosion-resistant coatings for the household maintenance and light industrial
markets. WM. ZINSSER is the nation's leading producer of shellac items used as
pharmaceutical glazes, confectioner's glazes, citrus fruit coatings and wood
coatings, including a broad line of specialty primers and sealers. KOP-COAT
manufactures pleasure marine coatings and compounds and manufactures wood
treatment products. BONDEX INTERNATIONAL produces a nationwide line of
household patch and repair products, in addition to basement waterproofing
products. DYNATRON/BONDO manufactures auto and marine body filler and related
products. TALSOL manufactures automotive paints and coatings. Other consumer
do-it-yourself products include fabrics, window treatments and wall coverings
sold by DESIGN/CRAFT FABRIC and RICHARD E. THIBAUT. RPM's consumer
do-it-yourself products are marketed through thousands of mass merchandise,
home center and hardware stores throughout North America.
FOREIGN OPERATIONS
The Company's foreign operations for the year ended May 31, 1994 accounted
for approximately 12.3% of its total sales, although it also receives license
fees and royalty income from numerous license agreements and joint ventures in
foreign countries. The Company has manufacturing facilities in Canada,
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Belgium, the Netherlands and Luxembourg, and sales offices or public
warehouse facilities in France, England, Iberia, Mexico, the Philippines
and several other countries. Information concerning the Company's foreign
operations is set forth in Note J (Industry Segment and Geographic Area
Information) of Notes to Consolidated Financial Statements, which appear
elsewhere in this Form 10-K Annual Report.
COMPETITION
The Company is engaged in a highly competitive industry and, with
respect to all of its major products, faces competition from local and national
firms. Several of the companies with which RPM competes have greater financial
resources and sales organizations than the Company. While no accurate figures
are available with respect to the size of or the Company's position in the
market for any particular product, management believes that the Company is a
major producer of aluminum coatings, cement-based paint, hobby paints, marine
coatings, furniture finishing repair products, automotive repair products,
industrial corrosion control and consumer rust-preventative coatings. The
Company, however, does not believe that it has a significant share of the total
protective coatings market.
PATENTS, TRADEMARKS AND LICENSES
No single patent, trademark (other than the marks Day-Glo, Rust-Oleum and
Carboline, which are material), name or license, or group of these rights, is
material to the Company's business.
Day-Glo Color Corp., a subsidiary of the Company, is the owner of over 50
trademark registrations of the mark and name "DAY-GLO" in numerous countries
and the United States for a variety of fluorescent products. There are also
many other foreign and domestic registrations for other trademarks of the
Day-Glo Color Corp., for a total of over 100 registrations. These
registrations are valid for a variety of terms ranging from one year to twenty
years, which terms are renewable as long as the marks continue to be used.
Many of these registrations are renewed on a regular basis.
Rust-Oleum Corporation, a subsidiary of the Company, is the owner of over 50
United States trademark registrations for the mark and name "RUST-OLEUM" and
other trademarks covering a variety of rust-preventative coatings sold by
Rust-Oleum Corporation. There are also many foreign registrations for
"RUST-OLEUM" and the other trademarks of Rust-Oleum Corporation, for a total of
nearly 400 registrations. These registrations are valid for a variety of terms
ranging from one year to twenty years, which terms are renewable for as long as
the marks continue to be used. Many of these registrations are renewed on a
regular basis.
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Carboline Company, a subsidiary of the Company, is the owner of a United
States trademark registration for the mark "CARBOLINE". Carboline Company is
also the owner of several other United States registrations for other
trademarks. Renewal of these registrations is done on a regular basis.
Product trade names include: ALOX, ALUMANATION, AVALON, B-I-N PRIMER-SEALER,
BITUMASTIC, BONDO, BONDEX, BULLS EYE SHELLAC, CARBOLINE, COLOR DOUGH, CRAFT
HOUSE, DAY-GLO, DYNALITE, DYNATRON, EASY FINISH, EPOXSTEEL, EZ WELD, FLOQUIL,
GEOFLEX, LUBRASPIN, MAR-HYDE, MOHAWK, PARASEAL, PERMAROOF, PETTIT, PLASITE,
RADGLO, RUST-OLEUM, SANITILE, STONCLAD, STONHARD, STONSHIELD, TALSOL, TESTORS,
ULTRALITE, VULKEM, WOOLSEY, ZINSSER and Z-SPAR; and, in Europe, RUST-OLEUM and
MARTIN MATHYS.
RAW MATERIALS
The Company believes that alternate sources of supply of raw materials are
available to the Company for most of its raw materials. Where shortages of raw
materials have occurred, the Company has been able to reformulate products to
use more readily available raw materials. Although the Company has been able
to reformulate products to use more readily available raw materials in the
past, there can be no assurance as to the Company's ability to do so in the
future.
SEASONAL FACTORS
The Company's business is seasonal due to outside weather factors. The
Company historically experiences strong sales and income in the first, second
and fourth fiscal quarters, with weaker performance in the third fiscal quarter
(December through February).
CUSTOMERS
No one customer accounted for 10% or more of the Company's total sales. The
Company's business is not dependent upon any one customer or small group of
customers and is dispersed over thousands of customers.
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BACKLOG
The Company historically has not had a significant backlog of orders, nor
was there a significant backlog during the last fiscal year.
RESEARCH
The Company's research and development work is performed in various
laboratory locations throughout the United States. During fiscal years 1994,
1993 and 1992, the Company invested approximately $11.1 million, $10.0 million
and $9.1 million, respectively, on research and development activities. The
customer sponsored portion of such expenditures was not significant.
ENVIRONMENTAL MATTERS
While the Company is involved in several environmental matters (see ITEM 3.
LEGAL PROCEEDINGS), compliance with environmental laws and regulations has not
had and is not expected to have a material adverse effect on capital
expenditures, earnings, or the competitive position of the Company.
EMPLOYEES
The Company employs approximately 4,500 persons, of whom approximately
800 were represented by unions under contracts which expire at varying
times in the future. The Company believes that its relations with its
employees are good.
ITEM 2. PROPERTIES.
The Company's corporate headquarters and a plant and offices for one
subsidiary are located on an 80-acre site in Medina, Ohio, which is owned by
the Company. The Company's operations occupy a total of approximately 4.9
million square feet, with the majority, approximately 4.4 million square feet,
devoted to manufacturing, assembly and storage. Of the approximately 4.9
million square feet occupied, 3.7 million square feet are owned and 1.2
million square feet are occupied under operating leases. The Company's
facilities of 100,000 square feet or larger, as of August 1, 1994, are set
forth in the table below.
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<TABLE>
<CAPTION>
Approximate
Square Feet
Type of of Leased or
Location Facility Floor Space Owned
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<S> <C> <C> <C>
Toledo, Manufacturing, 280,000 Owned
Ohio Office and
Warehouse
Newark, Manufacturing 195,200 Owned
New Jersey and Warehouse
Zelem, Office, 180,000 Owned
Belgium Manufacturing
and Warehouse
Atlanta, Office, 176,000 Owned(1)
Georgia Manufacturing
and Warehouse
Watertown, Manufacturing, 135,800 Owned
Massachusetts Office
and Warehouse
Amsterdam, Manufacturing, 134,100 Owned
New York Warehouse (20 Acres)
and Office
Cleveland, Office, 132,000 Owned
Ohio Warehouse and
Manufacturing
Rockford, Warehouse 131,200 Leased
Illinois (August 1, 1998)
Attleboro, Manufacturing 130,000 Owned
Massachusetts and Warehouse
Rockford, Manufacturing 119,100 Owned
Illinois
Kalkaska, Manufacturing, 105,000 Leased
Michigan Warehouse (January 1, 1997)
and Office
Pleasant Prairie, Manufacturing 298,000 Owned
Wisconsin and Warehouse
Hagerstown, Manufacturing 143,000 Owned
Maryland
</TABLE>
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(1) Rental payments are being used to pay principal and interest on
Industrial Revenue Bonds issued by Wachovia National Bank on behalf of Fulton
County, Georgia Development Authority. At June 1, 1994 the outstanding balance
of such indebtedness was $1,950,000.
For information concerning the Company's rental obligations,
see Note F (Leases) of Notes to Consolidated Financial Statements, which appear
elsewhere in this Form 10-K Annual Report. Under all of its leases, the
Company is obligated to pay certain varying insurance costs, utilities, real
property taxes and other costs and expenses.
The Company believes that its manufacturing plants and office
facilities are well maintained and suitable for the operations of the Company.
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ITEM 3. LEGAL PROCEEDINGS.
Bondex International, Inc., a wholly-owned subsidiary of the
Company ("Bondex"), was dismissed with prejudice from a pending
asbestos-related bodily injury lawsuit which had consolidated the claims of
fourteen plaintiffs. The dismissal resulted from the inability of the
plaintiffs to produce evidence of exposure to any Bondex asbestos-containing
product. With the addition of 43 newly-filed cases (including 33 filed by one
law firm in Middlesex County, New Jersey), there are currently pending against
Bondex a total of 340 asbestos-related bodily injury cases filed on behalf of
various individuals in various jurisdictions in the United States. All of
these lawsuits name numerous other corporate defendants and all allege bodily
injury as a result of the exposure to or use of asbestos-containing products.
Bondex continues to deny liability in all asbestos-related lawsuits and
continues to vigorously defend them. Under a cost-sharing agreement among
Bondex and its insurers effected in February, 1994, the insurers are
responsible for payment of a substantial portion of defense costs and indemnity
payments, if any, with Bondex responsible for a minor portion of each.
As previously reported in the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1993, Carboline Company, a wholly-owned
subsidiary of the Company ("Carboline"), has been named as one of 21 corporate
defendants in RUFINO O. CAVAZOS, ET AL., V. CEILCOTE COMPANY, ET AL., District
Court, 73rd Judicial District, Bexar County, Texas; Cause No. 89-Cl-12651,
filed in March, 1990, and in similar suits subsequently filed on behalf of
individuals (and, where applicable, their spouses and children) employed at the
Comanche Peak Nuclear Plant. Several supplemental petitions have been filed in
Bexar County for the purposes of adding other spouses and children of the
worker plaintiffs, bringing the total number of Bexar County plaintiffs to
10,110. Another suit with virtually identical allegations was filed in Rusk
County, Texas on December 29, 1993. That suit, Cause No. 93-470; MARY GUNN, ET
AL. V. SOUTHERN IMPERIAL COATINGS CORP., 4th District Court, Rusk County,
Texas, involves 201 worker plaintiffs and 128 spouses. All of the suits allege
bodily injury as a result of exposure to defendants' products. As the result
of the institution of receivership proceedings against Employers Casualty
Insurance Company (the carrier previously defending three unrelated
defendants), a stay has been entered in all the cases, and is due to expire on
January 6, 1995. Prior to the stay, the litigation had been continuing in the
discovery stage. Carboline has denied all liability and is conducting a
vigorous defense. Several of Carboline's insurance carriers, and Carboline,
are defending the lawsuit under a cost sharing agreement.
As previously reported in the Company's Quarterly Report on
Form 10-Q for the quarter ended February 28, 1994, in September, 1991, Our Lady
of the Lake Hospital, Inc. ("OLOL") filed suit
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captioned OUR LADY OF THE LAKE HOSPITAL, INC. V. CARBOLINE COMPANY, ET AL.,
Number 373,498, Division "J", Nineteenth Judicial District Court, Parish of
East Baton Rouge, State of Louisiana, alleging damages to the structural steel
of the hospital which it owns and operates in Baton Rouge, Louisiana. The
petition alleged that the damages resulted from its use of a fireproofing
product known as Pyrocrete manufactured and supplied by Carboline and that
Pyrocrete is extremely corrosive when applied to structural steel, contains a
latent defect, and is defective. Carboline has contested liability in the case
vigorously, and on July 21, 1992, the trial court sustained an Exception of
Prescription filed on Carboline's behalf and dismissed the suit with prejudice.
OLOL appealed, and on December 29, 1993, the appellate court vacated the
judgment dismissing the suit and remanded the matter to the trial court for the
introduction of further evidence and further proceedings. On June 13, 1994,
OLOL filed a Second Supplemental and Amending Petition which joined as party
defendants Sun Company, Inc. ("Sun") and Carboline Company, a Missouri
corporation which was merged into Sun pursuant to a statutory merger in 1980
("Carboline Missouri"); made claims of breach of warranty and products
liability against all of the defendants; and alleged that the Pyrocrete had
lost its capacity as a fireproofing agent. Pursuant to an agreement between
Carboline and Sun, Carboline is providing a defense for Sun in this litigation.
The Petition does not set forth the amount of damages being claimed; however,
in one of the briefs filed in the appellate court, OLOL claimed it would cost
in excess of $20 million to repair the damages. In addition, OLOL is preparing
a substantial claim for alleged lost revenues and profits.
In August, 1992 OLOL filed suit against Sun captioned OUR LADY
OF THE LAKE HOSPITAL, INC. V. SUN COMPANY, INC., Number 384,867, Division "I",
Nineteenth Judicial District Court, Parish of East Baton Rouge, State of
Louisiana, making allegations similar to the allegations in Number 373,498,
described above, and seeking to recover alleged damages to the structural steel
of the OLOL hospital. In addition, in the original petition filed in this
suit, OLOL alleged that Carboline Missouri manufactured and supplied the
Pyrocrete to OLOL and thereafter merged with Sun in January, 1980, with Sun
remaining as the surviving corporation responsible for the obligations of
Carboline Missouri. On June 29, 1993 OLOL filed a First Supplemental and
Amending Petition ("Amended Petition") which added Carboline as an additional
defendant. The Amended Petition generally alleged that Carboline damaged OLOL
through fraud and also breached a contractual obligation of service after the
sale. The Amended Petition alleged that OLOL will incur expenses and costs in
excess of $20 million to repair the damages. Carboline has filed an Exception
of Lis Pendens on the basis that this suit arose out of the same transaction or
occurrence as the suit described above. Pursuant to an agreement between
Carboline and Sun, Carboline is providing a defense for Sun in this litigation.
Sun has filed an Exception of Lis Pendens and a Failure to Assert All Causes of
Action. In June,
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1994, the court transferred and consolidated this suit with the suit described
above.
Carboline has denied the allegations of both lawsuits and is
vigorously contesting them. Carboline's defense has been assumed by First
Colonial Insurance Company ("First Colonial"), a wholly-owned insurance
subsidiary of the Company. First Colonial is in the process of negotiating a
cost-sharing agreement with a group of Carboline's insurers to cover both
defense and indemnity obligations relating to the OLOL lawsuits.
As previously reported in the Company's Quarterly Report on
Form 10-Q for the quarter ended August 31, 1993, and as updated in the
Company's Quarterly Reports on Form 10-Q for the quarters ended November 30,
1993 and February 28, 1994, Carboline was, in May, 1993, named by the U.S.
Environmental Protection Agency ("EPA") together with 36 other entities as a
potentially responsible party ("PRP") under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended ("CERCLA") in connection
with the Powell Road Landfill Site, Huber Heights, Ohio (the "Site").
Carboline is alleged to be associated with the Site as a consequence of
disposal of waste originating at its Xenia, Ohio plant. Carboline has joined
with other PRPs (now totalling 45) in a "PRP Organization Agreement" for the
purpose of conducting a common response to any claim for removal or response
action asserted by the EPA or the State of Ohio or conducting a common defense
to any such claim. Between 1987 and 1991, the owner of the Site, Waste
Management, Inc., conducted a remedial investigation ("RI") and feasibility
study ("FS") and, in 1991, submitted the RI/FS to the EPA. The EPA approved
the RI in March, 1992 and approved the FS in March, 1993. Based on the RI/FS,
the EPA issued its Record of Decision in September, 1993, in which it selected
the remedy for the cleanup of the Site. The remedy is estimated to cost $20.5
million and take six years to implement. Four PRPs, including the owner of the
Site (but not Carboline), have entered into an Administrative Order on Consent
with the EPA to prepare the Remedial Design for the selected remedy. Several
other PRPs, including Carboline, have offered to participate with the four
settling PRPs outside of the terms of the Administrative Order on Consent by
funding a share of the Remedial Design costs, which are estimated to be
approximately $1.7 million. Carboline's share of the Remedial Design costs
would be approximately 1.7% of the total, or $28,900. This cost-sharing
agreement for the Remedial Design is without prejudice to future cost-
allocation activities regarding the cleanup itself. Based upon Carboline's
estimated allocated share of total waste volume at the Site (approximately 0.50
percent) the Company believes that ultimate resolution of this matter will not
have a material adverse effect on the Company's financial position or results
of operations.
As previously reported in the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1993, and as updated in
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the Company's Quarterly Report on Form 10-Q for the quarter ended August 31,
1993, the Company has been notified by the EPA that it may have liability as a
PRP under CERCLA, in connection with the Springfield Township Dump Site,
Davisburg, Michigan (the "Springfield Site"). The Company is alleged to be
associated with the Springfield Site as well as the Rose Township Site, Rose
Township, Michigan (the "Rose Township Site") as a consequence of the disposal
of waste originating at Mac-O-Lac Paints, Inc., a former subsidiary of the
Company whose assets were sold in February, 1982. The EPA issued a Record of
Decision ("ROD") setting forth the preferred remedial action for the
Springfield Site which includes removal of volatile organic compound
contaminants from soils and groundwater as well as removal of PCB contaminated
soils. The Company and other PRPs have organized a steering committee (the
"Steering Committee") which has engaged in negotiations with the EPA with
respect to a proposed Interim Remedial Action Phase involving removal of
volatile organic contaminants from soils and groundwater and reimbursement of
the EPA for past response costs. The Steering Committee has strongly disputed
the ROD's requirement for PCB removal and this issue is being reevaluated by
the EPA. The Company and other PRPs have entered into a Consent Order to
perform a portion of the remedial design work for a cleanup and to reimburse
the EPA for a portion of costs the EPA incurred at the site. The Steering
Committee is presently negotiating with the EPA regarding the performance of a
groundwater cleanup response action. The EPA is expected to issue a Section
106 Administrative Order to the Company and eleven other parties requiring the
performance of the groundwater cleanup in accordance with the negotiated work
plan. The remaining settlement issues are still under discussion with the EPA.
The Company is pursuing the issue of coverage for this matter with its
insurance carriers. The Company believes that the ultimate resolution of this
matter will not have material adverse effect on the Company's financial
position or results of operations.
As previously reported in the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1993, the Company and certain other
entities named by the EPA as PRPs under CERCLA in connection with the Rose
Township Site reached an agreement with the EPA on the terms of a Consent
Decree which, on July 18, 1989, was entered by the Court in UNITED STATES OF
AMERICA V. AKZO COATINGS OF AMERICA, INC. ET. AL., U.S. District Court,
Eastern District of Michigan, Southern Division; Civil Action No.
88-CV-73784-DT. Pursuant to the agreement, the PRPs established a $9 million
fund to cover costs of remediation at the Rose Township Site. The Company's
share of the fund, $300,000, has been paid. The PRPs are currently performing
the remedial action required under the Consent Decree. The settling defendants
have submitted to the EPA a Feasibility Study Report recommending soil vapor
extraction as a method of remediation to replace soil flushing or enhanced soil
flushing. The EPA had previously concluded that neither soil flushing nor
enhanced soil flushing would achieve
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target cleanup levels for certain materials within the time frames specified in
the remedial action plan attached to the Consent Decree. The Rose Township PRP
Agreement provides that, upon the occurrence of such an event, the
participating PRPs shall meet to discuss the allocation of the costs of
performing further work. No meetings to discuss any further allocation have
been held or scheduled. It is anticipated that soil vapor extraction, if
approved as a remediation method, will not cost more than soil flushing or
enhanced soil flushing would have cost. The Feasibility Study, and any
corrected deficiencies perceived by the EPA, must be approved by the EPA prior
to selection of an alternate remedy by means of an amendment to the Record of
Decision. The Company is pursuing the issue of coverage for this matter with
its insurance carriers.
On December 3, 1992 the Company together with seven other Rose
Township PRPs filed a Second Amended Complaint in AKZO COATINGS OF AMERICA,
INC., ET AL. V. AMERICAN RENOVATING, ET AL., U.S. District Court, Eastern
District of Michigan, Southern Division; Case No. 92-CV-74105-DT, against
numerous other Rose Township PRPs not parties to the Consent Degree asserting a
right of contribution from each equal to each defendant's equitable share of
EPA past and future oversight costs at the Rose Township Site. The litigation
is currently in the discovery stage.
As previously reported in the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1993, the EPA has named Mac-O-Lac
Paints, Inc. as a PRP under CERCLA in connection with the Metamora Landfill
Site in Lapeer County, Michigan (the "Metamora Site"). Mac-O-Lac Paints, Inc.
was the purchaser in 1982 of the assets, including the name, Mac-O-Lac Paints,
Inc., a former subsidiary of the Company, whose name was subsequently changed.
In May, 1991, a number of PRPs reached agreement with the EPA on the terms of
settlement for performance of remedial action at the Metamora Site. The
Company has not been named as a PRP in this case and consequently did not
participate in the settlement agreement with the EPA. The Company believes it
has no liability in connection with the Metamora Site and considers the matter
closed.
As previously reported in the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1993, Mohawk Finishing Products, Inc., a
wholly-owned subsidiary of the Company ("Mohawk"), had been named by the EPA as
a PRP under CERCLA in connection with the Galaxy/Spectron Site, Elkton,
Maryland (the "Site"). Mohawk participated with the other PRPs in Phase I
cleanup at the Site, completed at a total cost to Mohawk of $15,465 pursuant to
a cash-out settlement provided Mohawk and other PRPs who shipped minimal
quantities of materials to the Site. The Company believes that Mohawk's share
of Phase II cleanup costs, if and when determined, will be similarly
inconsequential; accordingly, for purposes hereof, this matter is considered
closed.
-15-
<PAGE> 16
As previously reported in the Company's Annual Report on Form
10-K for the fiscal year ended Mary 31, 1993, Mohawk and Westfield Coatings
Corporation, a wholly-owned subsidiary of the Company ("Westfield"), were
notified by the EPA of their status as PRPs under CERCLA with respect to
environmental contamination at the Solvents Recovery of New England Site (the
"SRS Site") located in Southington, Connecticut. Since June, 1992, the EPA has
named in excess of 1,700 entities as PRPs in connection with the SRS Site. The
EPA recently issued a volumetric list in which Mohawk was assigned a volumetric
share of 0.1167% of the waste sent to the SRS Site and Westfield Coatings was
assigned a volumetric share of 0.93878%. The PRPs have not as yet agreed to
any allocation formula, whether based on volume or otherwise. In April, 1994,
the EPA issued the first phase of settlement offers to over 1,000 DE MINIMIS
parties, which were alleged to have sent 10,000 gallons or less of hazardous
substances to the SRS Site. Neither Mohawk nor Westfield was eligible to
participate in this first DE MINIMIS settlement offer. To date, the EPA has
expended in excess of $5 million in connection with the SRS Site, but has not
yet selected the final remedial action. The EPA has, however, proposed a
removal action with an estimated cost in the range of $3.5 million. PRPs not
participating in the DE MINIMIS settlement have been offered the opportunity to
perform the removal action. A group of several hundred PRPs, including
Westfield and Mohawk, has agreed to participate.
In January, 1994, the EPA notified Westfield of its status as
one of approximately 300 PRPs at the Old Southington Landfill Superfund Site
(the "Landfill") on the basis that process wastes from the SRS Site were sent
to the Landfill prior to October, 1967. The EPA has not issued a volumetric
list for the Landfill. In May, 1994, the EPA proposed a remedial action for
source control at the Landfill that includes a cap on the Landfill and a gas
collection system, at an estimated cost of approximately $16 million. The EPA
is currently evaluating whether mitigation of migration at the Landfill is
required and expects to issue a Record of Decision for source control later
this year.
As previously reported in the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1993, the Testor Corporation, a
wholly-owned subsidiary of the Company ("Testor"), which had been identified by
the EPA as a PRP under CERCLA in 1985 in connection with the Acme Solvent Site
in Rockford, Illinois (the "Acme Site"), participated with other Acme Site PRPs
in a voluntary remedial action pursuant to a Sharing Agreement entered into in
1986. That remedial action, Phase I of which is completed, involved removal
and disposal of contaminated source materials from the Acme Site and a
Supplemental Technical Investigation conducted by consultants to determine
actions required for permanent remediation of soils and groundwater at the Acme
Site in Phase II. Testor's share of Phase I remedial action costs totaled
approximately $965,000. In September, 1991, Testor entered into
-16-
<PAGE> 17
a Consent Decree with the EPA and a Sharing Agreement with 30 other Acme Site
PRPs with respect to Phase II remedial action at the Acme Site and to reimburse
the EPA for a portion of its past response costs, of which Testor's share of
$60,000 was paid to the EPA in December, 1991. The extent of Phase II has been
agreed upon in principal with the EPA subject to one exception noted herein.
The remedial action includes low temperature thermal stripping of contaminated
soils, filtration of VOCs and non-VOCs with carbon filtering of the
groundwater, provisions for an alternate water supply to the residents whose
wells have been affected, a pilot test for possible vapor extraction of the
bedrock, capping of the site, and maintenance of the various systems through
the year 2026. The latest cost projections for these activities is $20.4
million, although that number is subject to change due to possible
modifications of the remedial design and inflationary increases. Testor's
percentage has not been fixed pending an allocation of responsibility for other
PRPs which are expected to join the coalition. Current projections suggest
that Testor's share of these costs will be approximately 4.5%. The area of
remedial activity for which there is not an agreement in principal relates to
the southeast corner of an adjoining but unrelated CERCLA site. Groundwater
contamination has been found in that area but a determination has not been made
as to the source of the contamination.
Testor and other ACME Site PRPs filed suit in late 1986
against non-participating PRPs in ALLIED CORPORATION, ET AL. V. ACME SOLVENTS
RECLAIMING INC., ET AL., U.S. District Court, Northern District of Illinois,
Western Division; Case No. 86-C-2377, seeking contribution for Phase I costs.
As a result of a series of settlements, Testor has recovered a total of
$541,922 as its share of the amounts recovered from certain of the defendants.
The action has been dismissed. Counsel for the PRPs is currently exploring the
feasibility of collecting judgments against defunct or insolvent defendants but
no future recoveries of funds are anticipated.
Testor also filed a declaratory judgment action against its
general liability insurers seeking judicial determination of the carriers'
duties to defend and indemnify Testor in connection with the Acme Site; THE
TESTOR CORPORATION V. CONTINENTAL CASUALTY COMPANY, ET AL., Circuit Court, 17th
Judicial Circuit, Winnebago County, Illinois; Case No. 87-MR-69. Discovery in
that action had been stayed by the court pending resolution by the Illinois
Supreme Court of certain coverage issues which were to be decided in an
unrelated case. That stay was lifted in March, 1994 following a decision which
was largely favorable to the legal positions taken by Testor. The primary
insurers reimbursed Testor for some of its past defense costs by payment of
$339,000 on December 6, 1993 and $25,000 on April 4, 1994. The primary
insurers are paying current defense costs related to remedial activity at the
Acme Site. Negotiations are on-going regarding reimbursement of Testor's past
-17-
<PAGE> 18
response costs and acceptance of responsibility for future costs. No
meaningful settlement proposal has been made by the insurers to date and
preparations for trial are continuing.
In November, 1979, the EPA commenced an action captioned
UNITED STATES OF AMERICA V. MIDWEST SOLVENT RECOVERY, INC., ET AL., United
States District Court for the Northern District of Indiana, Eastern Division;
Civil No. H-79-556, pertaining to pollution allegedly occurring at and around
real property located at 7400 West Fifteenth Street, Gary, Indiana ("MIDCO
Sites"). The Complaint was subsequently amended in January, 1984 to join
Rust-Oleum Corporation, a wholly-owned subsidiary of the Company acquired on
June 28, 1994 ("Rust-Oleum"), and other entities as additional defendants.
Rust-Oleum, one of approximately 130 identified PRPs, is alleged to be
associated with the MIDCO Sites as a consequence of disposal of waste
originating at its former Evanston, Illinois plant in the mid-1970's. The
Court approved a Consent Decree in June, 1992 under which Rust-Oleum entered
into a Settlement Agreement with the other settling PRPs for the voluntary
cleanup of the MIDCO Sites consistent with the EPA Record of Decision ("ROD").
All surface hazardous wastes have been removed from the MIDCO Sites and cleanup
is now in the groundwater remediation stage. Remediation should be complete by
the end of 1996, with monitoring continuing for an undetermined period. Total
remediation and monitoring costs are currently estimated to be $30 million.
Included in the Consent Decree is an Agreement between the Settling PRPs,
including Rust-Oleum, and Third Parties who had been sued for contribution by
the generator PRPs, providing for payment by the Third Parties of their fair
share of the MIDCO Sites remedial and response costs. Third Party funds have
been placed into the MIDCO Trust Fund, which has been created to fund the MIDCO
Sites remedial actions. Rust-Oleum, as a Settling PRP, has provided financial
assurance for its share of the cleanup costs in the form of a Letter of Credit.
In March, 1988 the EPA named Rust-Oleum and 240 other entities
as PRPs under CERCLA in connection with the Ninth Avenue Site at 7537 Ninth
Avenue, Gary, Indiana (the "Ninth Avenue Site"). Rust-Oleum is alleged to be
associated with the Ninth Avenue Site as a consequence of disposal of waste
originating at its former Evanston, Illinois plant in the 1970's. Rust-Oleum
has cooperated with over twenty other PRPs in a voluntary cleanup under Phase I
and Phase I Participating Agreement and Implementation Trust Agreements. Total
Ninth Avenue Site remediation and monitoring costs are estimated to be
approximately $36 million, including past costs and the Final Site Remedy,
which includes groundwater remediation planned for completion by 1997 and
ongoing monitoring for an undetermined period. The EPA is in the process of
preparing an Amended ROD and Amended Unilateral Administrative Order under
which Rust-Oleum and other participating PRPs will commit to carry out the
Final Site Remedy. Rust-Oleum's allocation of cost is currently 6.048%, with
approximately $500,000 remaining to be paid,
-18-
<PAGE> 19
subject, however, to reduction to the extent settlements are made with
non-participating PRPs and funds are made available from a Trust fund
established by the EPA for DE MINIMIS settlors.
Based upon prior settlement agreements with insurance carriers
for potential costs and remediation liabilities in connection with the MIDCO
Sites and the Ninth Avenue Site, Rust-Oleum has established appropriate
reserves to cover such costs and liabilities. Accordingly, the Company
believes that ultimate resolution of these matters will not have a material
adverse effect on the Company's financial position or results of operations.
In March, 1987, the EPA named Rust-Oleum as a PRP under CERCLA
in connection with the American Chemical Service Superfund Site in Lake County,
Griffith, Indiana (the "ACS Site"). Rust-Oleum is alleged to be associated
with the ACS Site as a consequence of disposal of waste originating at its
former Evanston, Illinois plant in the 1960's. The EPA has offered DE MINIMIS
settlements to Rust-Oleum and other PRPs alleged to be responsible for small
percentages of the total waste sent to the ACS Site. Rust-Oleum has consented
to an Administrative Order on Consent ("AOC"), IN THE MATTER OF AMERICA
CHEMICAL SERVICES SUPERFUND SITE, United States Environmental Protection Agency
Region 5, authorizing settlement of Rust-Oleum's DE MINIMIS 0.16% share of the
estimated $70 million cleanup for the sum of $240,000. Under the provisions of
the AOC, Rust-Oleum will be protected from future suits by the EPA and the
State of Indiana and suits for contribution from other PRPs. Adequate accruals
have been made for the payment of the settlement amount in 1995. Rust-Oleum is
pursuing its liability insurance carriers for reimbursement of its ACS Site
settlement costs.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT*
The name, age and positions of each executive officer of the
Company as of August 19, 1994 are as follows:
-19-
<PAGE> 20
<TABLE>
<CAPTION>
Position and
Offices with
Name Age the Company
---- --- ------------
<S> <C> <C>
Thomas C. Sullivan 57 Chairman of the Board and Chief Executive Officer
James A. Karman 57 President and Chief Operating Officer
John H. Morris, Jr. 52 Executive Vice President
Richard E. Klar 61 Vice President and Treasurer
Paul A. Granzier 67 Vice President, General Counsel and Secretary
Glenn R. Hasman 40 Vice President - Administration
Frank C. Sullivan 33 Vice President and Chief Financial Officer
Charles R. Brush 58 Vice President - Environmental Affairs
Keith R. Smiley 32 Controller
<FN>
_______________________
* Included pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
</TABLE>
Thomas C. Sullivan has been Chairman of the Board and Chief
Executive Officer of the Company since October 1971. From June 1971 through
September 1978, Mr. Sullivan served as President and, prior thereto, as
Executive Vice President of the Company. Mr. Sullivan's employment with the
Company commenced in 1961, and he has been a Director since 1963. Mr. Sullivan
is employed as Chairman and Chief Executive Officer under an employment
agreement for a five-year period ending June 1, 1999. Mr. Sullivan is the
father of Frank C. Sullivan, Vice President and Chief Financial Officer of the
Company.
James A. Karman has been President and Chief Operating Officer
since September 1978. From October 1982 to October 1993 Mr. Karman also was
the Chief Financial Officer of the Company. From October 1973 through September
1978 Mr. Karman served as Executive Vice President, Secretary and Treasurer,
and, prior thereto, as Vice President-Finance and Treasurer of the Company.
Mr. Karman's employment with the Company commenced in 1963, and he
-20-
<PAGE> 21
has been a Director since 1963. Mr. Karman is employed as President and Chief
Operating Officer under an employment agreement for a five-year period ending
June 1, 1999.
John H. Morris, Jr. has been Executive Vice President since
January 1981. Prior to that time, he was Corporate Vice President of the
Company, having been elected to that position in September 1977. Mr. Morris
was elected a Director of the Company in 1981. Mr. Morris is employed as
Executive Vice President under an employment agreement for a period ending July
31, 1995.
Richard E. Klar was elected Vice President in October 1981 and
has been Treasurer since July 1980. He served as Chief Accounting Officer from
July 1980 to October 1990. Mr. Klar was Treasurer of Mameco International,
Inc., a wholly owned subsidiary which was acquired by the Company in February
1979, from 1979 to 1980 and was Mameco's Controller prior thereto. Mr. Klar is
employed as Vice President and Treasurer under an employment agreement for a
period ending July 31, 1995.
Paul A. Granzier has served as Secretary since July 1988, and
as Vice President and General Counsel since October 1987. Prior thereto, he
served as General Counsel since he joined the Company in May 1985. Mr.
Granzier was engaged in the private practice of law from 1981 until he joined
the Company. Prior thereto, he served as Assistant Corporate Counsel and
Assistant Secretary of Midland-Ross Corporation. Mr. Granzier is employed as
Vice President, General Counsel and Secretary under an employment agreement for
a period ending July 31, 1995.
Glenn R. Hasman has served as Vice President-Administration
since October 1993. From July 1990 to October 1993 Mr. Hasman served as
Controller. From September 1982 through July 1990, Mr. Hasman served in a
variety of management capacities, most recently Vice President-Operations and
Finance, Chief Financial Officer and Treasurer, of Proko Industries, Inc., a
former wholly owned subsidiary of the Company. From 1979 to 1982, Mr. Hasman
served as RPM's Director of Internal Audit and from 1976 to 1979 he was
associated with Ciulla Stephens & Co., independent accountants. Mr. Hasman is
employed as Vice President-Administration under an employment agreement for a
period ending July 31, 1995.
Frank C. Sullivan has served as the Chief Financial Officer of
the Company since October 1993 and has been a Vice President since October
1991. Prior thereto, he served as Director of Corporate Finance of the Company
from February 1989 to October 1991. Mr. Sullivan served as Regional Sales
Manager, from February 1988 to February 1989, and as a Technical Service
Representative, from February 1987 to February 1988, of AGR Company, an Ohio
General Partnership owned by the Company. Prior thereto, Mr. Sullivan was
employed by First Union National Bank (1985-1986) and Harris Bank (1983-1985).
Mr. Sullivan is employed as Vice
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<PAGE> 22
President and Chief Financial Officer under an employment agreement for a
period ending July 31, 1995. Mr. Sullivan is the son of Thomas C. Sullivan,
Chairman of the Board and Chief Executive Officer of the Company.
Charles R. Brush has served as Vice President-Environmental
Affairs of the Company since October 1993. From June 1991 to October 1993 he
served as the Company's Director Environmental & Regulatory Affairs. Prior
thereto, from 1988 to June 1991, he served as Vice President-Environmental &
Risk Management of Kop-Coat, Inc., a wholly-owned subsidiary of the Company.
Keith R. Smiley has served as Controller of the Company since
October 1993. From January 1992 until the present, Mr. Smiley also has served
as the Company's Internal Auditor. Prior thereto, he was a Manager at Ciulla
Stephens & Co.
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
RPM Common Shares, without par value, are traded on the NASDAQ
National Market System. Common Share prices are quoted daily under the symbol
RPOW. The high and low sales prices for the Common Shares, and the cash
dividends paid on the Common Shares, for each quarter of the two most recent
fiscal years is set forth in the table below.
<TABLE>
Range of Sales Prices
------------------------
<CAPTION>
Dividend Paid
Fiscal 1994 High Low Per Share
- - ----------- ---- --- -------------
<S> <C> <C> <C>
1st Quarter $18-1/2 $16-1/2 $ 0.12
2nd Quarter 18-5/8 16-3/4 0.13
3rd Quarter 19-3/8 16-5/8 0.13
4th Quarter 19-1/4 16-5/8 0.13
Fiscal 1993
- - -----------
1st Quarter* $ 15 7/8 $14 1/8 $0.113
2nd Quarter* 17 1/2 15 0.12
3rd Quarter 18 1/2 16 1/4 0.12
4th Quarter 19 3/8 17 3/8 0.12
<FN>
_______________
*Restated for 50% share dividend on December 4, 1992.
Source: The Wall Street Journal
</TABLE>
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<PAGE> 23
Cash dividends are payable quarterly, upon authorization of
the Board of Directors. Regular payment dates are approximately the 30th of
July, October, January and April. RPM maintains a Dividend Reinvestment Plan
whereby cash dividends, and a maximum of an additional $5,000 per month, may be
invested in RPM Common Shares purchased in the open market at no commission
cost.
The number of holders of record of RPM Common Shares as of
August 19, 1994 was approximately 25,000.
ITEM 6. SELECTED FINANCIAL DATA.(1)
The following table sets forth selected consolidated financial
data of the Company for each of the five (5) years during the period ended May
31, 1994 which has been restated to include the fiscal 1994 acquisitions of
Dynatron/Bondo Corporation and Stonhard, Inc. The data was derived from the
annual Consolidated Financial Statements of the Company which have been audited
by Ciulla Stephens & Co., independent accountants.
-23-
<PAGE> 24
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MAY 31,
--------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(AMOUNTS IN THOUSANDS EXCEPT
PER SHARE DATA)
Net sales 815,598 $768,372 $680,091 $619,613 $571,673
Income before income taxes 88,094 66,136 61,101 54,615 52,071
Net income 52,640 39,498 38,481 37,435 31,853
Return on sales % 6.5 5.1 5.7 6.0 5.6
Primary earnings per share 0.93 0.74 0.73 0.72 0.65
Fully diluted earnings per
share 0.89 0.72 0.72 0.71 0.63
Shareholders' equity 314,476 243,899 233,360 215,471 171,235
Shareholders' equity per share 5.54 4.58 4.42 4.13 3.49
Return on shareholders' equity
% 18.9 16.6 17.1 19.4 19.6
Average shares outstanding 56,717 53,267 52,790 52,219 49,070
Cash dividends paid 27,949 22,370 20,685 18,309 14,993
Cash dividends per share 0.51 0.47 0.44 0.40 0.36
Retained earnings 169,366 146,852 129,846 116,064 102,525
Working capital 226,994 191,872 205,419 142,581 152,576
Total assets 660,838 648,524 623,346 457,779 433,361
Long-term debt 233,039 258,712 273,871 120,250 168,051
Depreciation and amortization 25,905 22,283 20,436 15,589 13,567
<FN>
_______________
(1) For information concerning business acquisitions, see Note A(2) of
Notes to Consolidated Financial Statements, which appear elsewhere in
this Form 10-K Annual Report.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information required by this item is included under
Exhibit 99.4 to this Form 10-K Annual Report.
-24-
<PAGE> 25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is included under
Exhibit 99.5 to this Form 10-K Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item as to the Directors of the
Company appearing under the caption "Election of Directors" in the Company's
Proxy Statement to be used in connection with the Annual Meeting of
Shareholders to be held on October 10, 1994 (the "1994 Proxy Statement") is
incorporated herein by reference. Information required by this item as to the
executive officers of the Company is included in Part I of this Annual Report
on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated herein
by reference to "Executive Compensation" in the 1994 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by this item is incorporated herein
by reference to "Share Ownership of Management" in the 1994 Proxy Statement.
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<PAGE> 26
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated herein
by reference to "Election of Directors" in the 1994 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) The following financial statements and schedules and supplementary
quarterly information are filed as part of this Report on Exhibit 99.5
as indicated:
1. Financial Statements.
---------------------
Financial Statements
--------------------
Independent Auditors' Report
Consolidated Balance Sheets - May 31, 1994
and 1993
Consolidated Statements of Income - years
ended May 31, 1994, 1993, and 1992
Consolidated Statements of Shareholders'
Equity - years ended May 31, 1994, 1993
and 1992
Consolidated Statements of Cash Flows -
years ended May 31, 1994, 1993 and 1992
Notes to Consolidated Financial
Statements
Quarterly Information
2. Financial Statement Schedules.
-----------------------------
Schedule
--------
Independent Auditors' Report
Schedule VIII - Valuation and Qualifying
Accounts and Reserves
-26-
<PAGE> 27
Schedule
--------
Schedule IX - Short-term Borrowings
Schedule X - Supplementary Income Statement
Information
All other schedules have been omitted because they are not
applicable or not required, or because the required information is included in
the consolidated financial statements or notes thereto.
3. Exhibits.
---------
See the Index to Exhibits at page E-1 of this Form 10-K.
(b) Reports on Form 8-K.
--------------------
There were no Current Reports on Form 8-K filed during the
fourth fiscal quarter ended May 31, 1994.
-27-
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
RPM, INC.
Date: August 25, 1994 By: /s/ Thomas C. Sullivan
-----------------------------
Thomas C. Sullivan
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature and Title
- - -------------------
Chairman of the Board of
/s/ Thomas C. Sullivan Directors and Chief Execu-
- - ------------------------ tive Officer (Principal
Thomas C. Sullivan Executive Officer)
/s/ James A. Karman President and Chief Operating
- - ------------------------ Officer and a Director
James A. Karman
/s/ Frank C. Sullivan Vice President and Chief
- - ------------------------ Financial Officer (Principal
Frank C. Sullivan Financial Officer)
/s/ Glenn R. Hasman Vice President-Administration
- - ------------------------ (Principal Accounting Officer)
Glenn R. Hasman
/s/ Edward B. Brandon Director
- - ------------------------
Edward B. Brandon
/s/ Lorrie Gustin Director
- - ------------------------
Lorrie Gustin
/s/ Roy H. Holdt Director
- - ------------------------
Roy H. Holdt
/s/ E. Bradley Jones Director
- - ------------------------
E. Bradley Jones
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<PAGE> 29
/s/ Donald K. Miller Director
- - -------------------------
Donald K. Miller
/s/ John H. Morris, Jr. Executive Vice President
- - ------------------------- and a Director
John H. Morris, Jr.
/s/ Kevin O'Donnell Director
- - -------------------------
Kevin O'Donnell
/s/ William A. Papenbrock Director
- - -------------------------
William A. Papenbrock
/s/ Stephen Stranahan Director
- - -------------------------
Stephen Stranahan
Date: August 25, 1994
373/06821CIF.458
-29-
<PAGE> 30
<TABLE>
RPM, INC.
EXHIBIT INDEX
<CAPTION>
Exhibit No. Description
- - ----------- -----------
<S> <C> <C>
3.1 Amended Articles of Incorporation, as
amended . . . . . . . . . . . . . . . . . . . . . (A)(B)(C)
3.2 Amended Code of Regulations . . . . . . . . . . . (D)
4.1 Specimen Certificate of Common Shares, without
par value, of RPM, Inc. . . . . . . . . . . . . . (E)
4.2 Specimen LYONs Certificate. . . . . . . . . . . . (C)
4.3 Credit Agreement, dated as of December 14, 1993,
by and between RPM, Inc., RPOW (France) S.A., RPM
Europe B.V., Radiant Color, N.V., Credit Lyonnais
Chicago Branch, Credit Lyonnais Cayman Island
Branch and Credit Lyonnais Belguim. . . . . . . . .
4.4 Installment Sale Agreement, dated as of
October 15, 1979, by and between Department
of Community Affairs and Economic
Development and Gates Engineering
Company, Inc. . . . . . . . . . . . . . . . . . . (F)
4.4.1 Indenture of Trust and Mortgage, dated as
of October 15, 1979, from Department of
Community Affairs and Economic Development
to the Bank of Delaware, as
Trustee . . . . . . . . . . . . . . . . . . . . . (F)
4.5 Credit Facility, dated as of June 23, 1994,
by and among RPM, Inc., National City Bank
and The First National Bank of Chicago, as
Co-Agents, and The Chase Manhattan Bank
(National Association), as Administrative
Agent . . . . . . . . . . . . . . . . . . . . . . (G)
</TABLE>
E-1
<PAGE> 31
<TABLE>
<CAPTION>
Exhibit No. Description
- - ----------- -----------
<S> <C> <C>
4.6 Indenture, dated as of September 15, 1992,
between RPM, Inc. and The First National
Bank of Chicago, as trustee, with respect
to the LYONs . . . . . . . . . . . . . . . (C)
*10.1 Employment Agreement, dated as of July 22,
1981, by and between RPM, Inc. and
Thomas C. Sullivan, Chairman of the Board
and Chief Executive Officer . . . . . . . (H)
*10.1.1 Form of Amendment to Employment Agreement,
dated as of July 20, 1994, by and between
RPM, Inc. and Thomas C. Sullivan, Chairman
of the Board and Chief Executive Officer .
*10.2 Employment Agreement, dated as of
July 22, 1981, by and between RPM, Inc. and
James A. Karman, President
and Chief Operating Officer . . . . . . . . (H)
*10.2.1 Form of Amendment to Employment Agreement,
dated as of July 20, 1994, by and between
RPM, Inc. and James A. Karman, President
and Chief Operating Officer . . . . . . .
*10.3 Employment Agreement, dated as of July 15,
1992, by and between RPM, Inc. and Frank C.
Sullivan, Vice President and Chief
Financial Officer . . . . . . . . . . . . (I)
*10.4 Form of Employment Agreement entered into
by and between RPM, Inc. and each of
John H. Morris, Jr., Executive Vice
President, Richard E. Klar, Vice President
and Treasurer, Paul A. Granzier, Vice
President, General Counsel and Secretary,
and Glenn R. Hasman, Vice President -
Administration . . . . . . . . . . . . . . (J)
</TABLE>
E-2
<PAGE> 32
<TABLE>
<CAPTION>
Exhibit No. Description
- - ----------- -----------
<S> <C> <C>
*10.4.1 Form of Amendments to Employment
Agreements, dated as of July 20, 1994, by
and between RPM, Inc. and each of John H.
Morris, Jr., Executive Vice President,
Richard E. Klar, Vice President and
Treasurer, Paul A. Granzier, Vice
President, General Counsel and Secretary,
Glenn R. Hasman, Vice President-
Administration, and Frank C. Sullivan, Vice
President and Chief Financial Officer . . . .
*10.5 RPM, Inc. 1979 Stock Option Plan and form
of Stock Option Agreements used in connection
therewith . . . . . . . . . . . . . . . . . . (A)(B)(K)
*10.6 RPM, Inc. 1989 Stock Option Plan and form
of Stock Option Agreements to be used in
connection therewith . . . . . . . . . . . . (E)(L)
*10.7 RPM, Inc. Retirement Savings Trust and
Plan . . . . . . . . . . . . . . . . . . . . (J)
*10.8 RPM, Inc. Benefit Restoration Plan . . . . . (L)
*10.9 RPM, Inc. Board of Directors' Deferred
Compensation Agreement, as amended and
restated . . . . . . . . . . . . . . . . . .
*10.10 RPM, Inc. Deferred Compensation Plan
for Key Employees . . . . . . . . . . . . . .
11.1 Computation of Net Income per Common Share .
21.1 Subsidiaries of the Company . . . . . . . . .
23.1 Consent of Independent Certified Public
Accountants . . . . . . . . . . . . . . . . .
*99.1 Executive Risk Policy . . . . . . . . . . . . (J)
*99.2 Form of Indemnification Agreement entered
into by and between the Company and each of
its Directors and Executive Officers . . . . (L)
</TABLE>
E-3
<PAGE> 33
<TABLE>
<CAPTION>
Exhibit No. Description
- - ----------- -----------
<S> <C>
99.3 Part II, Legal Proceedings,
of the Company's Quarterly Reports on
Form 10-Q for the quarters ended August 31,
1993, November 30, 1993 and February 28,
1994 . . . . . . . . . . . . . . . . . . . .
99.4 Management's Discussion and Analysis of
Results of Operation and Financial
Condition . . . . . . . . . . . . . . . . .
99.5 Financial Statements and Schedules of RPM,
Inc. listed under Items 14(a)(1) and
14(a)(2) . . . . . . . . . . . . . . . . . .
<FN>
- - ------------------------------
*Management contract or compensatory plan or arrangement identified
pursuant to Item 14(c) of this Form 10-K.
(A) Incorporated herein by reference to the appropriate exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1984.
(B) Incorporated herein by referenced to the appropriate exhibit to
the Company's Annual Report on Form 10-K for the fiscal year ended May 31,
1987.
(C) Incorporated herein by reference to the appropriate exhibit to
the Company's Form S-3 Registration Statement (Reg. No. 33-50868).
(D) Incorporated herein by reference to the appropriate exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1988.
(E) Incorporated herein by reference to the appropriate exhibit to
the Company's Registration Statement on Form S-3 (Reg. No. 33- 39849).
(F) Incorporated herein by reference to the appropriate exhibit to the
Company's Quarterly Report on Form 10-Q for the three-months ended November 30,
1979.
(G) Incorporated herein by reference to the appropriate exhibit to the
Company's Current Report on Form 8-K dated as of June 28, 1994.
(H) Incorporated herein by reference to the appropriate exhibits to
the Company's Annual Report on Form 10-K for the fiscal year ended May 31,
1981.
</TABLE>
E-4
<PAGE> 34
(I) Incorporated herein by reference to the appropriate exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992.
(J) Incorporated herein by reference to the appropriate exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1989.
(K) Incorporated herein by reference to the appropriate exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1982.
(L) Incorporated herein by reference to the appropriate exhibit to
the Company's Annual Report on Form 10-K for the fiscal year ended May 31,
1991.
373/06821CIF.458
E-5
<PAGE> 1
EXHIBIT 4.3
MULTICURRENCY CREDIT AGREEMENT
Dated as of December 14, 1993
among
RPM, INC.,
RPOW (FRANCE) S.A.,
RPM EUROPE B.V.,
RADIANT COLOR N.V.,
CREDIT LYONNAIS CHICAGO BRANCH,
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
AND
CREDIT LYONNAIS BELGIUM
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C>
ARTICLE I - DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . 1
1.01. Certain Defined Terms . . . . . . . . . . . . . . . 1
1.02. Accounting Terms . . . . . . . . . . . . . . . . . 13
1.03. Currency Equivalents Generally . . . . . . . . . . 13
ARTICLE II - AMOUNTS AND TERMS OF THE ADVANCES . . . . . . . . 13
2.01. The Advances . . . . . . . . . . . . . . . . . . . 13
2.02. Making the Advances . . . . . . . . . . . . . . . 14
2.03. Conversion and Continuation Elections . . . . . . .15
2.04. Fees . . . . . . . . . . . . . . . . . . . . . . . 16
2.05. Voluntary Reduction of the Commitment . . . . . . .17
2.06. Repayment . . . . . . . . . . . . . . . . . . . . .17
2.07. Interest . . . . . . . . . . . . . . . . . . . . . 17
2.08. Extension of Term . . . . . . . . . . . . . . . . .18
2.09. Additional Interest on Eurocurrency
Advances . . . . . . . . . . . . . . . . . . . . 18
2.10. Increased Costs, Etc. . . . . . . . . . . . . . . .18
2.11. Prepayments; Funding Losses . . . . . . . . . . . .19
2.12. Inability to Determine Rates . . . . . . . . . . . 20
2.13. Taxes . . . . . . . . . . . . . . . . . . . . . . .21
2.14. Illegality . . . . . . . . . . . . . . . . . . . . 23
2.15. Sharing of Payments, Etc. . . . . . . . . . . . . .23
2.16. Evidence of Indebtedness . . . . . . . . . . . . . 24
2.17. Currency Equivalents . . . . . . . . . . . . . . . 24
2.18 Currency Fluctuations. . . . . . . . . . . . . . .25
2.19 Survival . . . . . . . . . . . . . . . . . . . . .25
ARTICLE III - GUARANTY . . . . . . . . . . . . . . . . . . . . 25
3.01. Guaranty . . . . . . . . . . . . . . . . . . . . . 25
3.02. Guaranty Absolute . . . . . . . . . . . . . . . . .25
3.03. Waiver . . . . . . . . . . . . . . . . . . . . . . 26
3.04. Subrogation . . . . . . . . . . . . . . . . . . . .26
ARTICLE IV - CONDITIONS OF LENDING . . . . . . . . . . . . . . 27
4.01. Condition Precedent to Initial Advances . . . . . .27
4.02. Conditions Precedent to Each Borrowing . . . . . . 27
ARTICLE V - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 28
5.01. Due Organization . . . . . . . . . . . . . . . . . 28
5.02. Due Authorization . . . . . . . . . . . . . . . . .28
5.03. No Governmental Approval . . . . . . . . . . . . . 28
5.04. Enforceable Agreement . . . . . . . . . . . . . . .29
5.05. Financial Information . . . . . . . . . . . . . . .29
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
(continued)
Page
----
<S> <C>
5.06. Litigation . . . . . . . . . . . . . . . . . . . 29
5.07. Margin Stock . . . . . . . . . . . . . . . . . . . 29
5.08. No Default . . . . . . . . . . . . . . . . . . . 29
5.09. ERISA Compliance . . . . . . . . . . . . . . . . . 29
5.10. Title to Properties . . . . . . . . . . . . . . . . 30
5.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . 30
5.12. Environmental Matters . . . . . . . . . . . . . . . 30
5.13. Use of Proceeds . . . . . . . . . . . . . . . . . . 31
5.14. Regulated Entities . . . . . . . . . . . . . . . . 31
5.15. Subsidiaries; No Restrictions on Dividends . . . . 31
5.16. Insurance . . . . . . . . . . . . . . . . . . . . . 31
5.17. Copyrights, Patents, Trademarks and
Licenses, Etc. . . . . . . . . . . . . . . . . . 31
ARTICLE VI - AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . 32
6.01. Financial Statements . . . . . . . . . . . . . . . 32
6.02. Certificates; Other Information . . . . . . . . . . 32
6.03. Notices . . . . . . . . . . . . . . . . . . . . . . 33
6.04. Preservation of Corporate Existence Rights,
Etc. . . . . . . . . . . . . . . . . . . . . . . 35
6.05. Insurance . . . . . . . . . . . . . . . . . . . . . 35
6.06. Payment of Obligations . . . . . . . . . . . . . . 35
6.07. Compliance with Laws . . . . . . . . . . . . . . . 35
6.08. Inspection of Property and Books and
Records . . . . . . . . . . . . . . . . . . . . . 35
6.09. Environmental Laws . . . . . . . . . . . . . . . . 36
6.10. Use of Proceeds . . . . . . . . . . . . . . . . . . 36
6.11. Further Assurances . . . . . . . . . . . . . . . . 36
ARTICLE VII - NEGATIVE COVENANTS . . . . . . . . . . . . . . . 36
7.01. Liens, Etc. . . . . . . . . . . . . . . . . . . . . 36
7.02. Mergers, Consolidations and Dispositions of
Assets . . . . . . . . . . . . . . . . . . . . . 38
7.03. Use of Proceeds . . . . . . . . . . . . . . . . . . 39
7.04. Compliance with ERISA . . . . . . . . . . . . . . . 39
7.05. Accounting Changes . . . . . . . . . . . . . . . . 40
7.06. Contracts of Subsidiaries. . . . . . . . . . . . . 40
7.07. Minimum Tangible Net Worth . . . . . . . . . . . . 40
7.08. Leverage Ratio . . . . . . . . . . . . . . . . . . 40
7.09. Ratio of Long-Term Debt to Capitalization . . . . . 40
7.10. Ratio of EBIT to Interest Expense . . . . . . . . . 40
ARTICLE VIII - EVENTS OF DEFAULT . . . . . . . . . . . . . . . 40
8.01. Events of Default . . . . . . . . . . . . . . . . . 40
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
(continued)
Page
----
<S> <C>
8.02. Remedies . . . . . . . . . . . . . . . . . . . . 43
ARTICLE IX - THE AGENT . . . . . . . . . . . . . . . . . . . . 44
9.01. Authorization and Action . . . . . . . . . . . . . 44
9.02. Agent's Reliance, Etc. . . . . . . . . . . . . . . 44
9.03. CLCB and Affiliates . . . . . . . . . . . . . . . . 45
9.04. Indemnification . . . . . . . . . . . . . . . . . . 45
ARTICLE X - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . .46
10.01. Amendments, Etc. . . . . . . . . . . . . . . . . . 46
10.02. Notices, Etc. . . . . . . . . . . . . . . . . . . 46
10.03. No Waiver; Remedies . . . . . . . . . . . . . . . 47
10.04. Expenses . . . . . . . . . . . . . . . . . . . . . 47
10.05. Right of Set-off . . . . . . . . . . . . . . . . . 47
10.06. Judgment Currency Conversions . . . . . . . . . . 48
10.07. Binding Effect . . . . . . . . . . . . . . . . . . 48
10.08. Participations . . . . . . . . . . . . . . . . . . 48
10.09. Execution in Counterparts . . . . . . . . . . . . 49
10.10. Severability . . . . . . . . . . . . . . . . . . . 49
10.11. GOVERNING LAW AND JURISDICTION . . . . . . . . . . 49
10.12. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . .50
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule 2.01 Lender Advance Percentages
Schedule 5.06 Litigation Matters
Schedule 5.12 Environmental Matters
Schedule 5.15 Subsidiaries
EXHIBITS
Exhibit A Form of Compliance Certificate
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Notice of Conversion/Continuation
Exhibit D Form of Opinion of Counsel to RPM
</TABLE>
-iii-
<PAGE> 5
MULTICURRENCY CREDIT AGREEMENT
This Multicurrency Credit Agreement (the "Agreement") is
entered into as of December 14, 1993 among RPM, Inc., a
corporation organized under the laws of the State of Ohio
("RPM"), RPOW (France) S.A., a corporation organized under the
laws of France, RPM Europe B.V., a corporation organized under
the laws of the Netherlands, and Radiant Color N.V., a
corporation organized under the laws of Belgium, (RPOW (France)
S.A., RPM Europe B.V. and Radiant Color N.V. are hereinafter
referred to as the "Subsidiary Borrowers," and RPM and the
Subsidiary Borrowers are each referred to hereinafter
individually as a "Borrower" and, collectively, as the
"Borrowers"), the lenders (the "Lenders") listed on the signature
pages hereof, and Credit Lyonnais Chicago Branch ("CLCB") as
agent (the "Agent") for the lenders hereunder.
PRELIMINARY STATEMENT
---------------------
RPM has requested that the Lenders make loans available to
it and certain of its Subsidiaries pursuant to the terms of this
Agreement, which include, among other terms, a guaranty by RPM of
any loans made to such Subsidiaries. The Agent and Lenders have
agreed to do so.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01. CERTAIN DEFINED TERMS. As used in this Agreement,
the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"ADVANCE" means a Base Rate Advance or a Eurocurrency
Advance.
"AFFILIATE" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. A Person shall be deemed
to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the
direction of the management and policies of the other Person,
whether through the ownership of voting securities, by contract
or otherwise. Without limitation, any director, executive
officer or beneficial owner of 15% or more of the voting equity
of a Person shall for the purposes of this Agreement, be deemed
to control the other Person.
"ALLOCATION PERCENTAGE" means, with respect to CLCB,
66-2/3%, and, with respect to Credit Lyonnais Belgium, 33-1/3%.
<PAGE> 6
"ALTERNATIVE CURRENCY" means Belgian francs, Dutch guilders,
French francs or British sterling as the case may be.
"APPLICABLE MARGIN" means for the Interest Period for each
Eurocurrency Advance comprising part of the same Borrowing, the
margin set forth below opposite the then current RPM Subordinated
Debt Rating:
<TABLE>
<CAPTION>
RPM Subordinated Applicable
Debt Rating Margin
---------------- ----------
<S> <C>
The S&P rating is better than BBB+ 0.40%
AND the Moody's rating is better
than Baal
The above does not apply, but 0.50%
the S&P rating is better than BB+
AND the Moody's rating is better
than Bal
The above do not apply, but the 0.75%
S&P rating is better than BB AND
the Moody's rating is better than
Ba
All other cases 1.00%
</TABLE>
For purposes of this definition, "RPM Subordinated Debt
Rating" means the ratings assigned by Moody's and S&P that are in
effect two Business Days before the first day of such Interest
Period. If a rating is only available from either Moody's or S&P
but not both, the available rating shall be used to determine the
Applicable Margin and the requirement relating to the unavailable
rating shall be waived.
If no rating is in effect from either Moody's or S&P, the
Applicable Margin, for the Interest Period for each Eurocurrency
Advance comprising part of the same Borrowing shall be the margin
set forth below opposite RPM's ratio of EBIT to Consolidated
Interest Expense as calculated using RPM's most recent
-2-
<PAGE> 7
consolidated financial statements delivered to the Agent pursuant
to Section 6.01 hereof:
<TABLE>
<CAPTION>
EBIT/Consolidated
Interest Expense Applicable
for RPM Margin
----------------- ----------
<S> <C>
Greater than or
equal to 6.50:1 0.45%
5.00 - 6.49:1 0.50%
3.50 - 4.99:1 0.55%
3.00 - 3.49:1 0.65%
Less than or
equal to 2.99:1 0.75%
</TABLE>
"BASE RATE" means, on a daily basis, for a borrowing
consisting of:
(a) Dollars -- the higher of (i) the rate per annum
established by the Agent from time to time as the reference
rate for short-term commercial loans in Dollars to U.S.
domestic corporate borrowers (which the Borrowers
acknowledge is not necessarily the Agent's lowest rate) and
(ii) the overnight cost of funds to the Agent as determined
solely by the Agent plus one percent (1%) per annum;
(b) Belgian francs -- the rate per annum quoted as the
overdraft rate by the principal office of Credit Lyonnais in
Brussels, Belgium for domestic corporate borrowers;
(c) Dutch guilders -- the rate per annum quoted as the
overdraft rate by the principal office of Credit Lyonnais in
Rotterdam, Netherlands for domestic corporate borrowers;
(d) French francs -- the rate per annum quoted as the
overdraft rate by the principal office of Credit Lyonnais in
Paris, France for domestic corporate borrowers; and
(e) British sterling -- the rate per annum quoted as
the overdraft rate by the principal office of Credit
Lyonnais in London, England for domestic corporate
borrowers;
"BASE RATE ADVANCE" means an Advance which bears interest at
a rate per annum determined on the basis of a Base Rate.
"BORROWING" means a borrowing hereunder consisting of
Advances made to the same Borrower on the same day by the
Lenders.
-3-
<PAGE> 8
"BUSINESS DAY" means a day of the year on which banks are
not required or authorized to close in Chicago, Illinois and
(i) with respect to any Advance to a Subsidiary Borrower, is also
a day of the year on which banks are not required or authorized
to close in Brussels, Belgium and (ii) with respect to
Eurocurrency Advances in Dollars, Dutch guilders or French francs
is also a day on which dealings are carried on in the London
interbank market, and (iii) with respect to Eurocurrency Advances
in Belgian francs, Dutch guilders or French francs, is also a day
on which banks are open for business in the country of issue of
the currency of such Eurocurrency Advance.
"CLB" means Credit Lyonnais Belgium.
"CLOSING DATE" means the date of execution of this
Agreement.
"CODE" means the U.S. Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"COMMITMENT" has the meaning specified in Section 2.01.
"COMPLIANCE CERTIFICATE" means a certificate delivered to
the Agent by RPM pursuant to Section 6.02(a), substantially in
the form of Exhibit A.
"CONSOLIDATED CAPITALIZATION" means, as of the date of any
determination thereof with respect to any Person, the aggregate
of the shareholders' equity of such Person and its Subsidiaries
appearing on the balance sheet of such Person plus such Person's
Consolidated Long Term Debt, all prepared in accordance with
GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period with
respect to any Person, all amounts (including all commissions,
discounts, fees and other charges in connection with any
Indebtedness) which would, in accordance with GAAP, be included
in interest expense on the consolidated income statement of such
Person and its Subsidiaries for such period.
"CONSOLIDATED LONG TERM DEBT" means, as of the date of
determination thereof with respect to any Person, the aggregate
amount of all Indebtedness which would, in accordance with GAAP,
constitute long term Indebtedness (including, without limitation:.
(a) any Indebtedness with a maturity of more than one year after
the creation of such Indebtedness, and (b) any lease obligations
which would be considered capital lease obligations under GAAP)
on the balance sheet of such Person and its Subsidiaries prepared
in accordance with GAAP on a consolidated basis.
"CONSOLIDATED NET INCOME (LOSS)" means, for any period, with
respect to any Person, all amounts which would, in accordance
-4-
<PAGE> 9
with GAAP, be included in net income (loss) on the consolidated
income statement of such Person and its Subsidiaries for such
period.
"CONSOLIDATED TANGIBLE NET WORTH" means, as of the date of
the determination thereof, with respect to any Person, the
aggregate amount of shareholders' equity of such Person and its
Subsidiaries appearing on the balance sheet of such Person and
its Subsidiaries prepared in accordance with GAAP on a
consolidated basis, LESS the sum of (without duplication) (a) the
cost of any treasury shares included on such balance sheet and
(b) the aggregate of all amounts that appear on the asset side of
such balance sheet and are attributable to assets which would be
treated as intangibles under GAAP, including, without limitation,
all such items as goodwill, trademarks, trade names, brand names,
copyrights, patents, patent applications, licenses, franchises,
permits and rights with respect to the foregoing, and unamortized
debt discount and expenses, PLUS, with respect to RPM, the
outstanding principal balance of the RPM Subordinated Debt.
"CONSOLIDATED TOTAL ASSETS" means, with respect to any
Person, as of the date of any determination thereof, the
aggregate of all assets appearing on the balance sheet of such
Person and its Subsidiaries prepared in accordance with GAAP on a
consolidated basis.
"CONSOLIDATED TOTAL LIABILITIES" means, with respect to any
Person, as of the date of any determination thereof, the
aggregate of all liabilities appearing on the balance sheet of
such Person and its Subsidiaries prepared in accordance with GAAP
on a consolidated basis.
"CONTRACTUAL OBLIGATIONS" means, as to any Person, any
provision of any security issued by such Person or of any
agreement, undertaking, contract, indenture, mortgage, deed of
trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its property is bound.
"CONTROLLED GROUP" means RPM and all Persons (whether or not
incorporated) under common control or treated as a single
employer with RPM pursuant to Section 414(b), (c), (m) or (o) of
the Code.
"CONVERSION DATE" means any date on which a Borrower elects
to convert (a) a Base Rate Advance to a Eurocurrency Advance or
to a Base Rate Advance in another Alternative Currency or Dollars
or (b) a Eurocurrency Advance to a Base Rate Advance or to a
Eurocurrency Advance in another Alternative Currency or Dollars.
"DEFAULT" means an event which with notice or lapse of time
or both would become an Event of Default.
-5-
<PAGE> 10
"DOLLARS" and the sign "$" each means lawful money of the
United States of America.
"EBIT" means, for any period, with respect to any Person,
the sum of (a) Consolidated Net Income (Loss), PLUS (b)
Consolidated Interest Expense, PLUS (c) provision for income
taxes to the extent included in the determination of Consolidated
Net Income (Loss), all determined on a consolidated basis in
accordance with GAAP for such Person and its Subsidiaries;
PROVIDED, HOWEVER, that Consolidated Net Income (Loss) shall be
computed for these purposes without giving effect to losses or
gains from discontinued operations or extraordinary losses or
gains.
"ENVIRONMENTAL CLAIMS" means all claims, however asserted,
by any Governmental Authority or other Person alleging potential
liability or responsibility for violation of any Environmental
Law or for release or injury to the environment or threat to
public health, personal injury (including sickness, disease or
death), property damage, natural resources damage, or otherwise
alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs,
restitution, civil or criminal penalties, injunctive relief, or
other type of relief, resulting from or based upon (a) the
alleged or actual presence, placement, migration, spillage,
leakage, disposal, discharge, emission or release of any
Hazardous Material at, in, or from property, whether or not owned
by a Borrower, or (b) any other circumstances forming the basis
of any violation, or alleged violation, of any Environmental Law.
"ENVIRONMENTAL LAWS" means all federal, national, state or
local laws, statutes, common law duties, rules, regulations,
ordinances and codes, together with all administrative orders,
directed duties, requests, licenses, authorizations, registration
requirements and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental
and land use matters or health and safety matters involving
Hazardous Materials.
"ERISA" means the U.S. Employee Retirement Income Security
Act of 1974, as amended from time to time, and regulations
promulgated and rulings issued thereunder.
"ERISA AFFILIATE" means any trade or business (whether or
not incorporated) under common control with a Borrower within the
meaning of Section 414(b), 414(c) or 414(m) of the Code.
"ERISA EVENT" means (a) with respect to any Qualified Plan
or Multiemployer Plan, an event set forth in Section 4043 of
ERISA or the regulations thereunder other than any such event for
which the 30-day notice requirement under ERISA has been waived
in regulations issued by the PBGC; (b) a withdrawal by a Borrower
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<PAGE> 11
or any ERISA Affiliate from a Qualified Plan subject to Section
4063 of ERISA during a plan year in which it was a substantial
employer (as defined in Section 4001(a)(2) of ERISA); (c) a
complete or partial withdrawal by a Borrower or any ERISA
Affiliate from a Multiemployer Plan or cessation of operations at
a facility by a Borrower or an ERISA Affiliate described in
Section 4062(e) of ERISA; (d) the filing of a notice of intent to
terminate, the treatment of a plan amendment as a termination
under Section 4041 or 4041A of ERISA or the commencement of
proceedings by the PBGC to terminate a Qualified Plan or
Multiemployer Plan subject to Title IV of ERISA; (e) a failure by
a Borrower or any member of the Controlled Group to make required
contributions to a Qualified Plan or Multiemployer Plan; (f) an
event or condition which constitutes grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee
to administer, any Qualified Plan or Multiemployer Plan; (g) the
imposition of any liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA,
upon a Borrower or any ERISA Affiliate; (h) an application for a
funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code with respect to any Plan;
(i) a non-exempt prohibited transaction occurs with respect to
any Plan for which a Borrower or any Subsidiary of a Borrower
could reasonably be expected to be directly or indirectly liable;
or (j) a violation of the applicable requirements of Section 404
or 405 of ERISA or the exclusive benefit rule under Section
401(a) of the Code by any fiduciary or disqualified person with
respect to any Plan for which a Borrower or any member of the
Controlled Group could reasonably be expected to be directly or
indirectly liable.
"EUROCURRENCY ADVANCE" means an Advance which bears interest
at a rate per annum determined on the basis of a Eurocurrency
Rate.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that
term in Regulation D of the Board of Governors of the U.S.
Federal Reserve System, as in effect from time to time.
"EUROCURRENCY RATE" means, for the Interest Period for each
Eurocurrency Advance comprising part of the same Borrowing, the
interest rate per annum determined by the Agent to be the average
(rounded upward to the nearest whole multiple of 1/16 of 1% per
annum, if such average is not such a multiple) of the average
offered rates for deposits in Dollars or in the relevant
Alternative Currency which appear on Telerate page 3750 (or as
the case may be, Telerate page 3740 or Telerate page 20339, or
any Telerate page from which quotations for the relevant rates
are available) as at or about 11:00 a.m., London time, two
Business Days before the first day of such Interest Period or, if
no such offerred rates appear on the relevant Telerate page, the
average rate of interest per annum (a) at which deposits in
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<PAGE> 12
Dollars or in the relevant Alternative Currency, other than
Belgian francs, are offered by the principal office of Credit
Lyonnais in London, England to prime banks in the London
interbank market at 11:00 a.m. (London time) or (b) at which
Belgian francs are offered by the principal office of Credit
Lyonnais Belgium to prime banks in the Brussels interbank market
at 11:00 a.m. (Brussels time) two Business Days before the first
day of such Interest Period in an amount substantially equal to
such Borrowing and for a period equal to such Interest Period.
The Eurocurrency Rate for the Interest Period for each
Eurocurrency Advance comprising part of the same Borrowing shall
be determined by the Agent on the basis of applicable rates
obtained by the Agent two Business Days before the first day of
such Interest Period.
"EUROCURRENCY RESERVE PERCENTAGE" of any Lender for any
Interest Period for a Eurocurrency Advance means the reserve
percentage applicable during such Interest Period (or if more
than one such percentage shall be so applicable, the daily
average of such percentages for those days in such Interest
Period during which any such percentage shall be so applicable)
under regulations issued from time to time by the Board of
Governors of the U.S. Federal Reserve System (or any successor)
for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal
reserve requirement) for such Lender with respect to liabilities
or assets consisting of or including Eurocurrency Liabilities
having a term equal to such Interest Period.
"EVENT OF DEFAULT" has the meaning specified in Section
8.01.
"EXPIRATION DATE" means December 14, 1996 or, if this
Agreement is extended as contemplated in Section 2.08 hereof, the
last date of the term as so extended.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to
the weighted average of the rates on overnight Federal funds
transactions with members of the U.S. Federal Reserve System
arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business
Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it.
"GAAP" means generally accepted accounting principles in the
United States as set forth from time to time in the opinions and
pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements
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and pronouncements of the Financial Accounting Standards Board
(or agencies with similar functions of comparable stature and
authority within the U.S. accounting profession), consistently
applied.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"HAZARDOUS MATERIALS" means all those substances which are
regulated by, or which may form the basis of liability under, any
Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste,
hazardous constituent, hazardous chemicals, special waste,
hazardous substance, hazardous material, regulated substance, or
toxic substance, or petroleum or petroleum derived substance or
waste.
"INDEBTEDNESS" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property
or services (other than trade payables incurred in the ordinary
course of business pursuant to ordinary terms); (c) all
obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or
businesses; (d) all indebtedness created or arising under any
conditional sale or other title retention agreement, or incurred
as financing, in either case with respect to property acquired by
the Person (even though the rights and remedies of the seller or
bank under such agreement in the event of default are limited to
repossession or sale of such property); (e) all obligations which
under GAAP would be classified as capital leases; and
(f) liabilities in respect of unfunded vested benefits under
plans covered by Title IV of ERISA.
"INSOLVENCY PROCEEDING" means (a) any case, action or
proceeding before any court or other Governmental Authority
relating to bankruptcy, reorganization, insolvency, liquidation,
receivership, dissolution, winding-up or relief of debtors, or
(b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors or other,
similar arrangement in respect of its creditors generally or any
substantial portion of its creditors; in each case (a) and (b)
undertaken under U.S. federal, state or foreign law, including
the U.S. Bankruptcy Code.
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"INTEREST PAYMENT DATE" means:
(a) with respect to any Eurocurrency Advance, the last
day of an Interest Period applicable to such Advance; and
(b) with respect to any Base Rate Advance,
(i) the last Business Day of each month for Base
Rate Advances outstanding during such month,
(ii) the Termination Date,
(iii) each date a Base Rate Advance is converted
into a Eurocurrency Advance; and
(iv) the date of any prepayment of a Base Rate
Advance pursuant to Section 2.11(a).
"INTEREST PERIOD" means, with respect to any Eurocurrency
Advance, the period commencing on the Business Day the Advance is
disbursed or continued or on the Conversion Date on which the
Advance is converted to a Eurocurrency Advance and ending on the
date one (1), two (2), three (3) or six (6) months thereafter, as
selected by a Borrower in its Notice of Borrowing or Notice of
Conversion/Continuation; provided that:
(a) if any Interest Period pertaining to a
Eurocurrency Advance would otherwise end on a day which is
not a Business Day, that Interest Period shall be extended
to the next succeeding Business Day unless the result of
such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period
shall end on the immediately preceding Business Day;
(b) any Interest Period pertaining to a Eurocurrency
Advance that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(c) no Interest Period shall extend beyond the
Termination Date.
"LENDING OFFICE" means, with respect to any Lender, the
office of such Lender specified as its Lending Office beneath its
name on its signature page hereto or such other office of such
Lender as such Lender may from time to time specify to the
Borrowers, the Agent and the Lenders.
"LENDER ADVANCE PERCENTAGES" has the meaning specified in
Section 2.01.
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"LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or other security interest
(including those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest
of a lessor under a capital lease, any financing lease having
substantially the same economic effect as any of the foregoing,
or the filing of any financing statement naming the owner of the
asset to which such lien relates as debtor, under the UCC or any
comparable law) and any contingent or other agreement to provide
any of the foregoing.
"MARGIN STOCK" means "margin stock" as such term is defined
in Regulation G, T, U or X of the U.S. Federal Reserve Board.
"MATERIAL ADVERSE EFFECT" means a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of
RPM and its Subsidiaries on a consolidated basis.
"MOODY'S" means Moody's Investor Service, Inc.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" (within
the meaning of Section 4001(a)(3) of ERISA) and to which any
member of the Controlled Group makes, is making, or is obligated
to make contributions or, during the preceding three calendar
years, has made, or been obligated to make, contributions.
"NOTICE OF BORROWING" means a notice given by a Borrower to
the Agent pursuant to Section 2.02, in substantially the form of
EXHIBIT B.
"NOTICE OF CONVERSION/CONTINUATION" means a notice given by
the Borrower to the Agent pursuant to Section 2.03, in
substantially the form of EXHIBIT C.
"OBLIGATIONS" means all Advances, guaranty obligations, and
other Indebtedness, liabilities, obligations, covenants and
duties owing by the Borrowers to any Lender, the Agent, or any
other Person required to be indemnified hereunder, of any kind or
nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, arising under this Agreement,
whether or not for the payment of money, whether arising by
reason of an extension of credit, a loan, guaranty,
indemnification or in any other manner, whether direct or
indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter
arising and however acquired.
"OTHER TAXES" has the meaning specified in Section 2.13(b).
"PBGC" means the U.S. Pension Benefit Guaranty Corporation.
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<PAGE> 16
"PAYMENT OFFICE" means, for Dollars, CLCB's office in
Chicago, Illinois, located on the date hereof at 227 West Monroe
Street, Chicago, Illinois 60606, and, for any Alternative
Currency, such office of Credit Lyonnais as shall be from time to
time selected by the Agent and notified by the Agent to the
Borrowers and the Lenders.
"PERSON" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"PLAN" means an employee benefit plan (as defined in Section
3(3) of ERISA) which RPM or any member of the Controlled Group
sponsors or maintains or to which RPM or any member of the
Controlled Group makes, is making or is obligated to make
contributions.
"PERMITTED LIENS" has the meaning specified in Section 7.01.
"QUALIFIED PLAN" means a pension plan (as defined in Section
3(2) of ERISA) intended to be tax-qualified under Section 401(a)
of the Code and which any member of the Controlled Group
sponsors, maintains, or to which it makes, is making or is
obligated to make contributions, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding period
covering at least five (5) plan years, but excluding any
Multiemployer Plan.
"RPM SUBORDINATED DEBT" means those certain twenty-year
Liquid Yield Option Notes issued by RPM in 1992 in the aggregate
principal amount of $400,000,000.
"S&P" means Standard & Poor's Corporation.
"SEC" means the Securities and Exchange Commission of the
United States of America.
"SUBSIDIARY" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more
than 50% of the voting stock or other equity interests (in the
case of Persons other than corporations), is owned or controlled
directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof.
"SUBSIDIARY OBLIGATIONS" means Obligations which are owed by
any Subsidiary Borrower.
"TAXES" has the meaning specified in Section 2.13(a).
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<PAGE> 17
"TERMINATION DATE" means the earlier of the Expiration Date
or the date of termination in whole of the Commitment pursuant to
Section 2.05 or 8.02.
"TYPE" means, with reference to an Advance, a Base Rate
Advance or a Eurocurrency Advance.
"UCC" means the Uniform Commercial Code as promulgated by
the American Law Institute and the National Conference of
Commissioners on Uniform State Laws in the United States.
"UNFUNDED PENSION LIABILITIES" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined as of the date of
the most recently completed actuarial valuation with respect to
the Plan in accordance with the assumptions used by the Plan's
actuaries for funding the Plan pursuant to section 412 for the
applicable plan year.
"UNITED STATES" and "U.S." each means United States of
America.
"WHOLLY-OWNED SUBSIDIARY" means any corporation in which
(other than directors' qualifying shares required by law) 100% of
the capital stock of each class having ordinary voting power, and
100% of the capital stock of every other class, in each case, at
the time as of which any determination is being made, is owned,
beneficially and of record, by a Borrower, or by one or more of
the other Wholly-Owned Subsidiaries, or both.
"WITHDRAWAL LIABILITIES" means, as of any determination
date, the aggregate amount of the liabilities, if any, pursuant
to Section 4201 of ERISA if the Controlled Group made a complete
withdrawal from all Multiemployer Plans and any increase in
contributions pursuant to Section 4243 of ERISA.
1.02. ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with
GAAP as consistently applied in the preparation of the financial
statements referred to in Section 5.05.
1.03. CURRENCY EQUIVALENTS GENERALLY. For all purposes of
this Agreement other than Article II, the equivalent in any
Alternative Currency of an amount in Dollars shall be determined
at the rate of exchange quoted by Credit Lyonnais Belgium in
Brussels, Belgium, at 11:00 a.m. (Brussels time) on the date of
determination, to prime banks in Brussels for the spot purchase
in the Brussels foreign exchange market of such amount of Dollars
with such Alternative Currency.
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ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
2.01. THE ADVANCES. Each Lender severally agrees, on the
terms and conditions hereinafter set forth, to make Advances in
accordance with the "Lender Advance Percentages" set forth in
SCHEDULE 2.01 hereto to the Borrowers from time to time on any
Business Day during the period from the date hereof until
(a) with respect to Eurocurrency Advances, the date falling one
month prior to December 14, 1996 and (b) with respect to Base
Rate Advances, December 12, 1996. The aggregate amount of all
the Lenders' Advances shall not exceed (whether in Dollars or in
one or more Alternative Currencies) at any time outstanding the
equivalent of $30,000,000 (as such amount may be reduced from
time to time pursuant to Section 2.05) (the "Commitment"). Each
Borrowing shall be in an aggregate amount not less than
$1,000,000 (or the equivalent thereof in any Alternative
Currency) or an integral multiple of $1,000,000 (or the
equivalent thereof in any Alternative Currency) in excess thereof
and shall consist of Advances made to the same Borrower on the
same day by the Lenders ratably according to the Lender Advance
Percentages. Within the limits of the Commitment, each Borrower
may borrow, repay and reborrow under this Section 2.01. For
purposes of this Section 2.01 and all other provisions of this
Article II, the equivalent in Dollars of any Alternative Currency
or the equivalent in any Alternative Currency of Dollars or of
any other Alternative Currency shall be determined in accordance
with Section 2.17.
2.02. MAKING THE ADVANCES.
(a) Each Borrowing shall be made on a Borrower's
irrevocable written notice (or telephonic notice, promptly
confirmed by a writing) delivered to the Agent in the form
of a Notice of Borrowing (which notice must be received by
the Agent not later than 10:00 a.m. (Chicago time)):.
(i) three Business Days prior to the requested
date of a proposed Borrowing consisting of Eurocurrency
Advances, and
(ii) two Business Days prior to the requested date
of a proposed Borrowing consisting of Base Rate
Advances.
The Notice of Borrowing shall specify (i) the requested date
of such Borrowing, which shall be a Business Day, (ii) the
name of the Borrower, (iii) the aggregate amount of such
Borrowing, (iv) whether the Borrowing is to be comprised of
Eurocurrency Advances or Base Rate Advances; (v) the
currency of such Borrowing and (vi) the Interest Period for
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each Eurocurrency Advance to be made as part of such
Borrowing.
(b) The Agent shall promptly notify each Lender upon
receipt of a Notice of Borrowing and of such Lender's pro
rata share (pursuant to the Lender Advance Percentages)
thereof. If the Borrowing is in an Alternative Currency,
the Agent shall also state the aggregate equivalent amount
of such Borrowing in Dollars and such Lender's ratable
portion of such Borrowing.
(c) Each Lender shall, before 10:00 a.m. (Chicago
time) on the date of such Borrowing, make available to the
Agent at the Agent's applicable Payment Office its pro rata
share (pursuant to the Lender Advance Percentages) of the
Borrowing in the requested currency. The Agent will make
such funds available to the Borrower at the applicable
Payment Office.
(d) After giving effect to any Borrowing, conversion
or continuation, there shall not be more than five
different Interest Periods in effect, and there shall not be
more than five Borrowing(s) per month.
2.03. CONVERSION AND CONTINUATION ELECTIONS.
(a) Prior to thirty days before the Termination Date,
a Borrower may upon irrevocable written notice (or
telephonic notice, promptly confirmed by a writing) to the
Agent in accordance with Section 2.03(b):
(i) elect to convert on any Business Day, any
Base Rate Advances (or any part thereof in an amount
not less than $1,000,000 (or the equivalent in an
Alternative Currency of $1,000,000) or an integral
multiple thereof) made to it to Eurocurrency Advances
or to Base Rate Advances in another Alternative
Currency of Dollars; or
(ii) elect to convert on any Interest Payment Date
any Eurocurrency Advances maturing on such Interest
Payment Date (or any part thereof in an amount not less
than $1,000,000 (or the equivalent in an Alternative
Currency of $1,000,000) or an integral multiple
thereof) to Base Rate Advances or to Eurocurrency
Advances in another Alternative Currency or Dollars; or
(iii) elect to continue on any Interest Payment
Date any Eurocurrency Advances maturing on such
Interest Payment Date (or any part thereof in an amount
not less than $1,000,000 (or the equivalent in an
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Alternative Currency of $1,000,000)) or an integral
multiple thereof).
(b) Each Borrower shall deliver a Notice of
Conversion/Continuation to be received by the Agent not
later than 10:00 a.m. (Chicago time) at least (i) three
Business Days in advance of the Conversion Date or
continuation date, if the Advances are to be converted into
or continued as Eurocurrency Advances and (ii) two Business
Days in advance of the Conversion Date, if the Advances are
to be converted into Base Rate Advances, specifying:
(A) the proposed Conversion Date or continuation
date;
(B) the aggregate amount of Advances to be
converted or renewed;
(C) the nature of the proposed conversion or
continuation; and
(D) the duration of the requested Interest
Period.
(c) If, upon the expiration of any Interest Period, a
Borrower has failed to select a new Interest Period to be
applicable to its Eurocurrency Advances or if any Default or
Event of Default then exists, such Borrower shall be deemed
to have elected to convert such Eurocurrency Advances into
Base Rate Advances (in the same currency) effective as of
the expiration date of such Interest Period.
(d) Upon receipt of a Notice of Conversion/
Continuation, the Agent will promptly notify each Lender
thereof, or, if no timely notice is provided by a Borrower,
the Agent will promptly notify each Lender of the details of
any automatic conversion. All conversions and continuations
shall be made pro rata according to the outstanding
principal amounts of the Advances of each Lender with
respect to which the notice was given.
(e) During the existence of a Default or Event of
Default, no Borrower may elect to have an Advance made,
converted into or continued as a Eurocurrency Advance.
2.04. FEES.
(a) COMMITMENT FEE. RPM agrees to pay to the Agent
for the account of each Lender in accordance with its
Allocation Percentage a commitment fee on the average daily
unused portion of the Commitment from the date hereof until
the Termination Date, payable on the last day of each March,
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June, September and December commencing December 31, 1993,
and on the Termination Date, at the rate of one-quarter of
one percent (1/4%) per annum.
(b) FACILITY FEE. RPM agrees to pay to the Agent on
the Closing Date for the account of each Lender in
accordance with its Allocation Percentage a facility fee
equal to one-tenth of one percent (1/10%) of $30,000,000.
2.05. VOLUNTARY REDUCTION OF THE COMMITMENT. RPM shall
have the right, upon at least three (3) Business Days' notice to
the Agent, to terminate in whole or reduce in part the unused
portion of the Commitment; PROVIDED, HOWEVER, that each partial
reduction shall be in the aggregate amount of $1,000,000 (or the
equivalent in any Alternative Currency) or an integral multiple
of $1,000,000 (or the equivalent in any Alternative Currency) in
excess thereof.
2.06. REPAYMENT. The Borrowers shall repay the principal
amount of all Advances on the Termination Date.
2.07. INTEREST.
(a) Each Borrower shall pay to the Agent for the
account of each Lender interest on the unpaid principal
amount of each Advance made to it by such Lender from the
date of such Advance until such Advance is paid in full, at
a rate per annum equal to:
(i) with respect to a Eurocurrency Advance, the
sum of (x) the Eurocurrency Rate for such Interest
Period plus (y) the Applicable Margin and
(ii) with respect to a Base Rate Advance, the Base
Rate.
(b) Interest on each Advance shall be paid in arrears
on each Interest Payment Date relating to such Advance.
During the existence of an Event of Default, interest shall
be paid on demand.
(c) During the continuance of an Event of Default and
after acceleration, the Borrowers shall pay interest on the
principal amount of all Obligations due and payable at a
rate per annum equal to 2% above the rate per annum required
to be paid.on such Advance immediately prior to the date on
which such amount became due.
(d) The Agent shall give prompt notice to the
Borrowers and the Lenders of the applicable interest rate;
PROVIDED that any failure to do so shall not relieve the
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<PAGE> 22
Borrowers of any liability hereunder or provide the basis
for any claim against the Agent.
(e) All computations of fees and interest under this
Agreement shall be made on the basis of a 360-day year and actual
days elapsed. Each determination of an interest rate by the
Agent pursuant hereto shall be conclusive and binding on the
Borrowers and the Lenders in the absence of manifest error.
2.08. EXTENSION OF TERM. Once a year, beginning in 1994,
the Lenders, upon the request of RPM, will determine, in their
sole and absolute discretion, whether to extend the current
Expiration Date of this Agreement by one year; PROVIDED that RPM
makes its extension request to the Agent in writing at least 60
days, but not more than 90 days before December 14th of that
year. The Agent shall then notify RPM of the Lenders' decision
no later than 30 days before December 14th of that year. If the
Lenders decide to extend the Expiration Date, such extension
shall be effective on the effective date of a written amendment
so extending the Expiration Date, executed by the Agent, each
Lender and each Borrower.
2.09. ADDITIONAL INTEREST ON EUROCURRENCY ADVANCES. The
Borrowers shall pay to each Lender, when and if such Lender is
required under regulations of the Board of Governors of the U.S.
Federal Reserve System to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities, additional interest on the unpaid principal amount
of each Eurocurrency Advance of such Lender from the date of each
such Eurocurrency Advance until the principal amount is paid in
full at an interest rate per annum equal at all times to the
remainder obtained by subtracting (i) the Eurocurrency Rate for
the Interest Period for such Eurocurrency Advance from (ii) the
rate obtained by dividing such Eurocurrency Rate by a percentage
equal to 100% minus the Eurocurrency Reserve Percentage of such
Lender for such Interest Period, payable on each date on which
interest is payable on such Eurocurrency Advance. Such
additional interest shall be determined by such Lender and
notified to the Borrowers through the Agent. Such determination
shall be conclusive and binding for all purposes, absent manifest
error.
2.10. INCREASED COSTS, ETC.
(a) If, due to either (i) the introduction of or any
change in or in the interpretation of any law or regulation
or (ii) the compliance with any guideline or request from
any central bank or other Governmental Authority (whether or
not having the force of law), there shall be any increase in
the cost to any Lender of agreeing to make or making,
funding or maintaining Eurocurrency Advances (other than the
additional amounts referred to in Section 2.09), then the
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<PAGE> 23
Borrowers shall from time to time, upon demand by such
Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased
cost. A certificate as to the amount of such increased
cost, submitted to RPM and the Agent by such Lender, shall
be conclusive and binding for all purposes, absent manifest
error.
(b) If any Lender determines that compliance with any
law or regulation or any guideline or request from any
central bank or other Governmental Authority (whether or not
having the force of law) affects or would affect the amount
of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and that
the amount of such capital is increased by or based upon the
existence of such Lender's commitment to lend hereunder and
other commitments of this type, then, upon demand by such
Lender (with a copy of such demand to the Agent), the
Borrowers shall immediately pay to the Agent for the account
of such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such
Lender or such corporation in the light of such
circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the
existence of such Lender's commitment to lend hereunder. A
certificate as to such amounts submitted to RPM and the
Agent by such Lender shall be conclusive and binding for all
purposes, absent manifest error.
2.11. PREPAYMENTS; FUNDING LOSSES.
(a) Prepayments of Base Rate Advances are permitted on
two Business Days' written notice to the Agent. Prepayments
of Eurocurrency Advances are permitted on three Business
Days' written notice to the Agent, PROVIDED, that any
Borrower who prepays a Eurocurrency Advance reimburses each
Lender for its losses or expenses incurred or sustained as a
consequence of such prepayment in accordance with
Section 2.11(b).
(b) The Borrowers agree to reimburse each Lender and
to hold each Lender harmless from any loss or expense which
such Lender sustains or incurs as a consequence of:
(i) the failure of any Borrower to make any
payment or required prepayment of principal of any
Eurocurrency Advance (including payments made after any
acceleration thereof);
(ii) the failure of any Borrower to borrow,
continue or convert an Advance after such Borrower has
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given a Notice of Borrowing or a Notice of Conversion/
Continuation;
(iii) the failure of any Borrower to make any
prepayment permitted hereunder after giving notice
thereof;
(iv) the repayment of a Eurocurrency Advance
on a day which is not the last day of the Interest
Period with respect thereto; or
(v) the conversion of any Eurocurrency
Advance to a Base Rate Advance on a day that is not the
last day of the respective Interest Period;
including any such loss or expense (including any loss of income)
arising from the liquidation or reemployment of funds obtained by
it to maintain its Eurocurrency Advances hereunder or from fees
payable to terminate the deposits from which such funds were
obtained. Reemployment costs shall include the amount (if any)
by which the amount of interest which such Lender is able to
obtain for the remainder of the period of the Eurocurrency
Advance by placing the principal amount repaid by the Borrower on
deposit in the applicable interbank market IS LESS than the
amount of interest which would have accrued on the amount prepaid
for the remaining period thereon if no repayment had taken place.
A certificate delivered by the Agent as to the determination of
the reemployment cost shall be conclusive and binding on the
Borrower absent manifest error. Solely for purposes of
calculating amounts payable by the Borrowers to the Lenders under
this Section 2.11, each Eurocurrency Advance made by a Lender
(and each related reserve, special deposit or similar
requirement) shall be conclusively deemed to have been funded by
a matching deposit in Dollars or an Alternative Currency or other
borrowing in the interbank eurocurrency market for a comparable
amount and for a comparable period, whether or not such
Eurocurrency Advance is in fact so funded.
2.12. INABILITY TO DETERMINE RATES. If the Agent
determines that for any reason adequate and reasonable means do
not exist for ascertaining the rate for any requested Interest
Period with respect to a proposed Eurocurrency Advance, or the
rate for any requested Interest Period with respect to a proposed
Eurocurrency Advance does not fairly reflect the cost to the
Lenders of funding such Advance, the Agent will give notice of
the determination to the Borrowers and each Lender. Thereafter,
the obligation of the Lenders to make or maintain Eurocurrency
Advances hereunder shall be suspended until the Agent revokes
such notice in writing. Upon receipt of the Agent's notice of
its inability to determine rates, the Borrowers may revoke any
Notice of Borrowing or Notice of Conversion/Continuation. If the
applicable Borrower does not revoke such notice, the Lenders
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shall make, convert or continue the Advances, as proposed by the
Borrower, in the amount specified in the applicable notice
submitted by the Borrower, but such Advances shall be made,
converted or continued as Base Rate Advances (in the same
currency) instead of Eurocurrency Advances.
2.13. TAXES.
(a) Any and all payments by the Borrowers hereunder
shall be made free and clear of and without deduction or
withholding for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, EXCLUDING, in the case of
each Lender and the Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the
laws of which such Lender or the Agent (as the case may be)
is organized or any political subdivision thereof and, in
the case of each Lender, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction of such
Lender's Lending Office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrowers or the Agent
shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder to any Lender or the
Agent, (i) the sum payable by the Borrowers shall be
increased as may be necessary so that after the Borrowers or
the Agent has made all required deductions (including
deductions applicable to additional sums payable under this
Section 2.13) such Lender or the Agent (as the case may be)
receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrowers or the
Agent shall make such deductions and (iii) the Borrowers or
the Agent shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with
applicable law.
(b) In addition, each Borrower agrees to pay any
present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies which
arise from any payment made by such Borrower or by the Agent
hereunder or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement
(hereinafter referred to as "Other Taxes").
(c) Each Borrower will indemnify each Lender and the
Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this
Section 2.13) paid by such Lender or the Agent (as the case
may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto. This
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indemnification shall be made within 30 days from the date
such Lender or the Agent (as the case may be) makes written
demand therefor.
(d) Within 30 days after the date of any payment by
any Borrower of Taxes, such Borrower will furnish to the
Agent the original or a certified copy of a receipt
evidencing payment thereof. If no Taxes are payable in
respect of payments by such Borrower hereunder, such
Borrower, upon reasonable request by Agent, will furnish to
the Agent a certificate from each appropriate taxing
authority, unless it shall have previously delivered an
opinion of counsel acceptable to the Agent, in either case
stating that such payment is exempt from or not subject to
Taxes. In the event of a change in circumstances or law
affecting the conclusions stated in any such opinion,
another opinion of counsel acceptable to the Agent shall be
delivered to the Agent by the affected Borrower.
(e) Prior to the date of the initial Borrowing and
from time to time thereafter if requested by any Borrower or
the Agent, each Lender organized under the laws of a
jurisdiction outside the United States shall provide the
Agent and the Borrower with the forms prescribed by the
Internal Revenue Service of the United States certifying as
to such Lender's status for purposes of determining
exemption from United States withholding taxes with respect
to all payments to be made to such Lender hereunder or other
documents satisfactory to the Borrowers and the Agent which
shall indicate that all payments to be made to such Lender
hereunder are subject to such taxes at a rate reduced by an
applicable tax treaty. Unless the Borrowers and the Agent
have received forms (such as IRS Form 1001 or Form 4224) or
other documents satisfactory to them, indicating that
payments hereunder are not subject to United States
withholding tax or are subject to such tax at a rate reduced
by an applicable tax treaty, the Borrowers or the Agent
shall withhold taxes from such payments at the applicable
statutory rate in the case of payments to or for any Lender
organized under the laws of a jurisdiction outside the
United States. In no event shall a Borrower be required to
pay any additional amounts to the Agent or any Lender under
Section 2.13(a) as a result of, or in connection with, the
failure of a Lender to comply with this Section 2.13(e).
(f) In order to avoid the incurrence, or minimize the
amount, of any Taxes or Other Taxes, each Lender agrees to
designate a different Lending Office with respect to its
Eurocurrency Advances if such designation will reduce or
prevent the incurrence of such Taxes or Other Taxes and will
not, in the judgment of such Lender, be illegal or otherwise
disadvantageous to such Lender.
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<PAGE> 27
2.14. ILLEGALITY.
(a) If any Lender determines that the introduction of
any law or regulation, or any change in any law or
regulation or in the interpretation or administration
thereof, has made it unlawful, or that any central bank or
other Governmental Authority has asserted that it is
unlawful, for any Lender or its Lending Office to make
Eurocurrency Advances, then, on notice thereof by the Lender
to the Borrowers through the Agent, the obligation of that
Lender to make Eurocurrency Advances shall be suspended
until the Lender has notified the Agent and the Borrowers
that the circumstances giving rise to such determination no
longer exists.
(b) If a Lender determines that it is unlawful to
maintain any Eurocurrency Advance, the Borrowers shall
prepay in full all Eurocurrency Advances of that Lender then
outstanding, together with interest accrued thereon, either
on the last day of the Interest Period thereof if the Lender
may lawfully continue to maintain such Eurocurrency Advances
to such day, or immediately, if the Lender may not lawfully
continue to maintain such Eurocurrency Advances.
(c) If the Borrowers are required to prepay any
Eurocurrency Advances immediately as provided in Section
2.14(b), then concurrently with such prepayment, such
Borrowers shall borrow from the affected Lender, in the
amount of such repayment, a Base Rate Advance.
(d) Before giving any notice to the Agent pursuant to
this Section 2.14, the affected Lender shall designate a
different Lending Office with respect to its Eurocurrency
Advances if such designation will avoid the need for giving
such notice or making such demand and will not, in the
judgment of such Lender, be illegal or otherwise
disadvantageous to such Lender.
2.15. SHARING OF PAYMENTS, ETC. If any Lender obtains any
payment (whether voluntary, involuntary, through the exercise of
any right of set-off, or otherwise) on account of the Advances
made by it in excess of its ratable share of payments on account
of the Advances obtained by all the Lenders, such Lender shall
forthwith purchase from the other Lenders such participations in
the Advances made by them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each
of them, PROVIDED, HOWEVER, that if all or any portion of such
excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and
such Lender shall repay to the purchasing Lender the purchase
price to the extent of such recovery together with an amount
equal to such Lender's ratable share (according to the proportion
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of (a) the amount of such Lender's required repayment to (b) the
total amount so recovered from the purchasing Lender) of any
interest or other amount paid or payable by the purchasing Lender
in respect of the total amount so recovered. The Borrower agrees
that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.15 may, to the fullest extent
permitted by law, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the
amount of such participation. The provisions of this
Section 2.15 shall survive the payment of all Obligations.
2.16. EVIDENCE OF INDEBTEDNESS.
(a) Each Lender shall maintain in accordance with its
usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from
each Advance owing to such Lender from time to time,
including the amounts of principal and interest payable and
paid to such Lender from time to time hereunder.
(b) The Agent shall maintain a control account and a
subsidiary account for each Lender, in which accounts (taken
together) shall be recorded (i) the date and amount of each
Borrowing made hereunder, (ii) the name of the Borrower,
(iii) the Type of Advances comprising such Borrowing and the
Interest Period applicable thereto and, if such Advances are
Eurocurrency Advances, the currency in which such Advances
are made, (iv) the amount of any principal or interest due
and payable or to become due and payable from each Borrower
to each Lender hereunder, and (v) the amount of any sum
received by the Agent from the Borrowers hereunder and each
Lender's share thereof.
(c) Such entries made by the Agent shall be conclusive
and binding for all purposes, absent manifest error.
2.17. CURRENCY EQUIVALENTS. For purposes of the provisions
of this Article II, (a) the equivalent in Dollars of any
Alternative Currency shall be determined by using the quoted spot
rate at which Credit Lyonnais Belgium's principal office in
Brussels offers to exchange Dollars for such Alternative Currency
in Brussels at 11:00 a.m. (Brussels time) two Business Days prior
to the date on which such equivalent is to be determined, (b) the
equivalent in any Alternative Currency of any other Alternative
Currency shall be determined by using the quoted spot rate at
which Credit Lyonnais Belgium's principal office in Brussels
offers to exchange such Alternative Currency for the equivalent
in Dollars of such other Alternative Currency in Brussels at
11:00 a.m. (Brussels time) two Business Days prior to the date on
which such equivalent is to be determined, and (c) the equivalent
in any Alternative Currency of Dollars shall be determined by
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<PAGE> 29
using the quoted spot rate at which Credit Lyonnais Belgium's
principal office in Brussels offers to exchange such Alternative
Currency for Dollars in Brussels at 11:00 a.m. (Brussels time)
two Business Days prior to the date on which such equivalent is
to be determined.
2.18 CURRENCY FLUCTUATIONS. If, on any Interest Payment
Date related to a Eurocurrency Advances, the aggregate principal
amount of all the Advances (after converting each Eurocurrency
Advance to its U.S. Dollar equivalent on the date of calculation)
is equal to or greater than 120% of the Commitment then in
effect, then at the option of any Lender upon five Business Days'
written notice to the Company, the Company shall prepay or shall
cause one or more other Borrowers to prepay, an aggregate
principal amount of Advances such that the outstanding principal
balance of the Advances does not exceed the Commitment. In lieu
of requiring this payment under this Section 2.18, the Agent may,
with the unanimous consent of all of the Lenders, in their
absolute and sole discretion, increase the amount of the
Commitment.
2.19. SURVIVAL. The agreements and obligations of the
Borrowers in Sections 2.09 through 2.11 and 2.13 shall survive
for a period of one year beyond the later of (a) the Termination
Date and (b) the payment of all other Obligations.
ARTICLE III
GUARANTY
3.01. GUARANTY. RPM unconditionally guarantees the
punctual payment and performance when due, in Dollars (or the
equivalent thereof in any Alternative Currency), whether at
stated maturity, by acceleration or otherwise, of all Subsidiary
Obligations.
3.02. GUARANTY ABSOLUTE. This is a guaranty of payment and
not of collection. RPM guarantees that the Subsidiary
Obligations will be paid strictly in accordance with the terms of
this Agreement. The Obligations of RPM under this guaranty are
independent of the Subsidiary Obligations, and a separate action
or actions may be brought and prosecuted against RPM to enforce
this guaranty, whether or not any action is brought against the
Subsidiary Borrowers or whether the Subsidiary Borrowers are
joined in any such action or actions. This guaranty shall
continue to be effective or shall be reinstated, as the case may
be, if at any time any payment of any of the Subsidiary
Obligations is rescinded or must otherwise be returned by the
Lenders upon the insolvency, bankruptcy or reorganization of any
of the Subsidiary Borrowers or otherwise, all as though such
payment had not been made. The liability of RPM under this
guaranty shall be absolute and unconditional irrespective of:
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(a) any lack of validity or enforceability of any
other portion of this Agreement (including, without
limitation, the validity or enforceability against the
Subsidiary Borrowers of the Subsidiary Obligations) or any
other agreement or instrument relating hereto;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Subsidiary
Obligations, or any other amendment or waiver of or any
consent to departure from this Agreement, including, without
limitation, any increase in the Subsidiary Obligations
resulting from the extension of additional credit to the
Subsidiary Borrowers or otherwise;
(c) any change, restructuring or termination of the
corporate structure or existence of any of the Subsidiary
Borrowers; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the
Subsidiary Borrowers or a guarantor.
3.03. WAIVER. RPM hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of
the Subsidiary Obligations, and any requirement that the Lenders
exhaust any right or take any action against the Subsidiary
Borrowers or any other Person.
3.04. SUBROGATION. RPM hereby acknowledges and agrees that
any obligations owed by any Subsidiary Borrower to RPM, now or
hereafter arising, in connection with this Agreement or pursuant
to this guaranty are hereby subordinated to the Indebtedness of
the Subsidiary Borrowers to the Lenders and the Agent. RPM
hereby unconditionally agrees that until the payment and
satisfaction in full of all the Subsidiary Obligations, RPM:
(a) shall not exercise any right or remedy arising by reason of
any performance by RPM of its guarantee in this Article III,
whether by subrogation or otherwise, against the Subsidiary
Borrowers or any security for any of the Subsidiary Obligations,
and (b) shall promptly turn over to the Agent any funds or
collateral received by RPM from the Subsidiary Borrowers on
account of or relating to the Subsidiary Obligations or RPM's
payment of any portion to the Subsidiary Obligations (and RPM
shall hold any such funds or collateral in trust for the benefit
of the Lenders until such funds or collateral are delivered to
the Agent); PROVIDED, HOWEVER, RPM shall NOT be obligated to turn
over any funds or collateral received by RPM from the Subsidiary
Borrowers in the ordinary course of business if such funds or
collateral were not paid or delivered to RPM in connection with
the Subsidiary Obligations.
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ARTICLE IV
CONDITIONS OF LENDING
4.01. CONDITION PRECEDENT TO INITIAL ADVANCES. The
obligation of the Lenders to make the initial Advance is subject
to the conditions precedent that the Borrower shall have paid all
fees and expenses due on the Closing Date, and the Agent shall
have received on or before the day of the initial Borrowing the
following, in form and substance satisfactory to the Agent and in
sufficient copies for each Lender:
(a) This Agreement, executed by all the Borrowers;
(b) Certified copies of the resolutions of the Board
of Directors of RPM authorizing the Borrowings provided for
herein and the execution, delivery and performance of this
Agreement; equivalent documents for each Subsidiary
Borrower; and, with respect to all the Borrowers, certified
copies of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to
this Agreement;
(c) Copies of the articles or certificate of
incorporation of RPM, including all amendments thereto and
copies of the by-laws of RPM as in effect on the Closing
Date, with all amendments thereto, certified by the
secretary or assistant secretary of RPM;
(d) An existence and/or good standing certificate for
RPM from the Secretary of State of Ohio as of a recent date;
(e) A certificate of the secretary or an assistant
secretary of RPM certifying the names and true signatures of
the officers of each Borrower authorized to sign this
Agreement and the other documents to be delivered hereunder;
(f) A favorable opinion of Paul A. Granzier, General
Counsel for RPM, substantially in the form of EXHIBIT D
hereto and as to such other matters as any Lender through
the Agent may reasonably request; and
(g) Such other approvals, opinions or documents as the
Agent or any Lender may request.
4.02. CONDITIONS PRECEDENT TO EACH BORROWING. The
obligation of the Lenders to make an Advance is subject to the
satisfaction of the following conditions precedent on or before
the date the relevant Advance is to be made:
(a) With respect to each Borrowing, conversion or
continuation, the Agent shall have received a Notice of
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<PAGE> 32
Borrowing or a Notice of Continuation/Conversion, as
applicable.
(b) The representations and warranties made by the
Borrowers contained in Article V shall be true and correct
on and as of the date of each Borrowing with the same effect
as if made on and as of such date (except to the extent such
representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct as of
such earlier date).
(c) No Default or Event of Default shall exist or
shall result from such Advance.
(d) The Borrowers shall have paid all fees and
expenses due at such time.
Each Notice of Borrowing or Notice of Continuation/Conversion
submitted by a Borrower hereunder shall constitute a
representation and warranty by such Borrower hereunder, as of the
date of each such notice and as of the date of the making of each
Advance, that the conditions in this Section 4.02 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
With respect to Sections 5.05 and 5.06, RPM represents and
warrants, and with respect to Sections 5.01 through 5.04 and
Sections 5.07 through 5.17, each Borrower represents and warrants
as follows:
5.01. DUE ORGANIZATION. Such Borrower is a corporation
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation as indicated at the
beginning of this Agreement, and is duly qualified as a foreign
corporation and in good standing under the laws of each
jurisdiction in which it owns or leases real property or in which
such qualification is otherwise required.
5.02. DUE AUTHORIZATION. The execution, delivery and
performance by such Borrower of this Agreement are within such
Borrower's corporate powers, have been duly authorized by all
necessary corporate action, and do not contravene (i) such
Borrower's charter or by-laws or (ii) any law or contractual
restriction binding on or affecting such Borrower.
5.03. NO GOVERNMENTAL APPROVAL. No authorization or
approval or other action by, and no notice to or filing with, any
Governmental Authority or regulatory body is required for the due
execution, delivery and performance by such Borrower of this
Agreement.
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<PAGE> 33
5.04. ENFORCEABLE AGREEMENT. This Agreement is the legal,
valid and binding obligation of such Borrower enforceable against
such Borrower in accordance with its terms. The guaranty
contained in Article III is enforceable against RPM in accordance
with its terms.
5.05. FINANCIAL INFORMATION. The consolidated balance
sheets of RPM and its Subsidiaries as of May 31, 1993, and the
related consolidated statements of income and retained earnings
of RPM and its Subsidiaries for the fiscal year then ended,
copies of which have been furnished to each Lender, fairly
present the financial condition of RPM and its Subsidiaries as at
such date and the results of the operations of RPM and its
Subsidiaries for the period ended on such date, all in accordance
with GAAP consistently applied, and since May 31, 1993, there has
been no material adverse change in such condition or operations.
5.06. LITIGATION. There is no pending or threatened action
or proceeding affecting RPM or any of its Subsidiaries before any
court, Governmental Authority or arbitrator, that has not been
previously disclosed in RPM's filings with the SEC, or that may
result in a Materially Adverse Effect, or that purports to affect
the legality, validity or enforceability of this Agreement as to
any one of the Borrowers, except as disclosed on Schedule 5.06
attached hereto.
5.07. MARGIN STOCK. Such Borrower is not engaged in the
business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U issued
by the Board of Governors of the U.S. Federal Reserve System),
and no proceeds of any Advance will be used to purchase or carry
any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
5.08. NO DEFAULT. No Default or Event of Default has
occurred and is continuing or would result from the incurring of
any Obligations by such Borrower. Such Borrower is not in
default under or with respect to any material Contractual
Obligation.
5.09. ERISA COMPLIANCE. Each ERISA Affiliate has fulfilled
its obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of
ERISA and the Code with respect to each Plan or will be in such
compliance prior to the expiration of the remedial amendment
period permitted under Section 401(b) of the Code as such
remedial amendment period shall be extended by the Internal
Revenue Service. No ERISA Affiliate has (a) sought a waiver of
the minimum funding standard under Section 412 of the Code in
respect of any Plan, (b) failed to make any contribution or
payment to any Plan or made any amendment to any Plan, which has
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resulted or could result in the imposition of a Lien or the
posting of a bond or other security under ERISA or the Code or
(c) incurred any liability under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA.
5.10. TITLE TO PROPERTIES. Such Borrower has good and
marketable title to each item of real or personal property
purported to be owned by it (including intangibles such as
trademarks and patents) and a valid, enforceable and marketable
leasehold interest in each item of real and personal property
purported to be leased by it, in each case free and clear of all
Liens other than Permitted Liens.
5.11. TAXES. Such Borrower has filed all tax returns and
reports required to be filed by any Governmental Authority, and
has paid all taxes, assessments, fees and other governmental
charges levied or imposed upon it or its properties, income or
assets otherwise due and payable, except those which are being
contested in good faith by appropriate proceedings and for which
adequate reserves have been provided in accordance with GAAP (or
the comparable accounting standards of such Borrower's country),
and no notice of lien has been filed or recorded. There is no
proposed tax assessment against such Borrower which would, if the
assessment were made, reasonably be expected to adversely affect
the ability of the Lenders to collect the Advances.
5.12. ENVIRONMENTAL MATTERS. Except as has been previously
reported in RPM's filings with the SEC or as is specifically
disclosed in SCHEDULE 5.12:
(a) The on-going operations of such Borrower comply
in all material respects with all Environmental Laws, except
for those circumstances that would not (if enforced in
accordance with applicable law) result in liability that
would reasonably be expected to have a Material Adverse
Effect.
(b) Neither such Borrower nor any of its property or
operations is subject to any outstanding written order from
or agreement with any Governmental Authority nor subject to
any judicial or docketed administrative proceeding,
respecting any Environmental Law, Environmental Claim or
Hazardous Material that the outcome or result of which would
reasonably be expected to have a Material Adverse Effect.
(c) There are no Hazardous Materials or other
conditions or circumstances existing with respect to any
property, or arising from operations, of such Borrower or
any of its Subsidiaries that would reasonably be expected to
give rise to Environmental Claims with a potential liability
that in the aggregate for any such condition, circumstance
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<PAGE> 35
or property would reasonably be expected to have a Material
Adverse Effect.
5.13. USE OF PROCEEDS. The proceeds of the Advances are
being used by such Borrower for general corporate purposes
(including debt refinancing) and will not be used for the
purchase or carrying of Margin Stock in violation of
Regulations U or X of the Board of Governors of the U.S. Federal
Reserve System.
5.14. REGULATED ENTITIES. The Borrower is not an
"investment company" or an "affiliated person" or a "promoter" or
a "principal underwriter" for an "investment company," as such
terms are defined in the U.S. Investment Company Act of 1940, as
amended.
5.15. SUBSIDIARIES; No Restrictions on Dividends. Such
Borrower has no Subsidiaries other than those specifically
disclosed on SCHEDULE 5.15 attached hereto. No Subsidiary of
such Borrower is prohibited by the terms of any agreement from
paying dividends to such Borrower.
5.16. INSURANCE. The property of such Borrower is insured
with financially sound and reputable insurance companies, in such
amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses
and owning similar properties in localities where such Borrower
operates.
5.17. COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC.
Such Borrower or its Subsidiaries own or are licensed or
otherwise have the right to use all of the patents, trademarks,
service marks, trade names, copyrights, franchises,
authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict
with the rights of any other Person. To the best knowledge of
such Borrower, no slogan or other advertising device, product,
process, method, substance, part or other material now employed,
or now contemplated to be employed by such Borrower or any of its
Subsidiaries, infringes upon any rights held by any other Person.
Except as specifically disclosed in SCHEDULE 5.06, no claim or
litigation regarding any of the foregoing is pending or
threatened, and no patent, invention, device, application,
principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of such Borrower, proposed, that
has not been previously disclosed in RPM's filings with the SEC,
which, in either case, could reasonably be expected to have a
Material Adverse Effect.
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ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Advance or other Obligation remains unpaid or
unsatisfied or the Commitment remains available, with respect to
Sections 6.04 through 6.11, each Borrower will, and will cause
its Subsidiaries to, and with respect to Sections 6.01 through
6.03, RPM will:
6.01. FINANCIAL STATEMENTS. Deliver to the Agent in form
and detail satisfactory to the Agent with sufficient copies for
each Lender:
(a) as soon as available, but not later than 120 days
after the end of each fiscal year, a copy of the audited
financial statements of such Borrower as of the end of such
fiscal year, setting forth in each case in comparative form
the figures for the previous year, and accompanied by an
opinion of the independent public accounting firm of Ciulla
Stephens & Co. stating that such financial statements
present fairly the financial position of such Borrower as of
the dates indicated and the results of its operations and
cash flows for the periods indicated in conformity with GAAP
(or the comparable accounting standards of its country).
Such opinion shall not be qualified or limited for any
reason, including, without limitation, because of a
restricted or limited examination by such accountant of any
material portion of such Borrower's records; and
(b) as soon as available, but not later than 60 days
after the end of each of such Borrower's three non-year-end
fiscal quarters, a copy of the unaudited financial
statements of such Borrower setting forth its financial
position as of the end of such fiscal quarter and the
results of its operations and its cash flows for such
quarter, prepared in accordance with GAAP (or the comparable
accounting standards of such Borrower's country)
consistently applied.
6.02. CERTIFICATES; OTHER INFORMATION. Furnish to the
Agent with sufficient copies for each Lender:
(a) concurrently with the delivery of the financial
statements referred to in Sections 6.01(a) and (b) above, a
Compliance Certificate, signed by the chief financial
officer of such Borrower, and if any condition or event
which constitutes a Default or any Event of Default existed
or exists, a statement in such certificate specifying the
nature and period of existence thereof and the action such
Borrower has taken, is taking or proposes to take with
respect thereto;
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(b) promptly upon their becoming available,
copies all 10-Q's, 10-K's, 8-K's and all other material
registration statements and all periodic reports, if
any, which such Borrower shall have filed with (i) the
U.S. Securities and Exchange Commission (or any
successor agency), (ii) any national security exchange
or (iii) any other Governmental Authority; and
(c) promptly, such additional business, financial,
corporate affairs and other information as the Agent, at the
request of any Lender, may from time to time reasonably
request.
6.03. NOTICES. Promptly notify the Agent and each Lender
of the following conditions, events or situations to the extent
they have not been previously disclosed in RPM's filings with the
SEC:
(a) the occurrence of any Default or Event of Default;
(b) (i) any breach or non-performance of, or any
default under, any Contractual Obligation of such Borrower
which could result in a Material Adverse Effect; and
(ii) any dispute, litigation, investigation, proceeding or
suspension which may exist at any time between such Borrower
and any Governmental Authority which could result in a
Material Adverse Effect;
(c) the commencement of, or any material development
in, any litigation or proceeding affecting such Borrower
(i) which has a reasonable possibility of resulting in
liability to the Borrower in the amount of $10,000,000 or
more, (ii) in which injunctive or similar relief is sought
and which, if adversely determined, would reasonably be
expected to have a Material Adverse Effect, or (iii) in
which the relief sought is an injunction or other stay of
the performance of this Agreement;
(d) (i) any and all enforcement, cleanup, removal or
other governmental or regulatory actions instituted or
threatened against such Borrower or any of its properties
pursuant to any applicable Environmental Laws, (ii) all
other Environmental Claims, and (iii) any environmental or
similar condition on any real property adjoining or in the
vicinity of the property of such Borrower that could
reasonably be anticipated to cause the property of such
Borrower or any part thereof to be subject to any
restrictions on the ownership, occupancy, transferability or
use of such property under any Environmental Laws, if,
individually or in the aggregate, the events or conditions
described or the amount claimed in clauses (i), (ii) and
(iii) could result in a Material Adverse Effect;
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(e) any of the following ERISA events affecting such
Borrower or any member of its Controlled Group which,
individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect (but in no event
more than 10 days after the later of such event or the date
such Borrower knew or should have known of such event),
together with a copy of any notice with respect to such
event that may be required to be filed with a Governmental
Authority and is then due and any notice delivered by a
Governmental Authority to such Borrower or any member or its
Controlled Group with respect to such event:
(i) an ERISA Event;
(ii) the adoption of any new Plan that is subject
to Title IV of ERISA or Section 412 of the Code by any
member of the Controlled Group;
(iii) the adoption of any amendment to a Plan that
is subject to Title IV of ERISA or Section 412 of the
Code; or
(iv) the commencement of contributions by any
member of the Controlled Group to any Plan that is
subject to Title IV of ERISA or Section 412 of the
Code;
(f) any Material Adverse Effect subsequent to the date
of the most recent audited financial statements of RPM and
its Subsidiaries delivered to the Lenders pursuant to
Section 6.01(a).
Each notice pursuant to this section shall be accompanied by
a written statement signed by the chief financial officer of RPM
setting forth details of the occurrence referred to therein, and
stating what action RPM proposes to take with respect thereto and
at what time. Each notice under Section 6.03(a) shall describe
with particularity the provisions of this Agreement that have
been breached.
6.04. PRESERVATION OF CORPORATE EXISTENCE RIGHTS, ETC.
(a) Except as permitted in Section 7.02, maintain and
preserve in full force and effect its corporate (or other
form of) existence and good standing under the laws of its
jurisdiction of incorporation.
(b) Maintain and preserve all rights, privileges,
franchises, trademarks, trade names, service marks,
licenses, qualifications and other like rights now enjoyed
and necessary or useful in the operation of its business and
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keep all of its property in good working order and
condition, normal wear and tear excepted.
(c) Maintain and preserve the good will and business
of the customers, suppliers and others having material
business relations with it.
6.05. INSURANCE. Maintain with financially sound and
reputable independent insurers, insurance with respect to its
properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or
similar business, of such types and in such amounts as are
customarily carried under similar circumstances by such other
Persons; including workers' compensation insurance, public
liability and property and casualty insurance. Upon request of
the Agent or any Lender, such Borrower shall furnish the Agent,
with sufficient copies for each Lender, at reasonable intervals,
a certificate of the chief financial officer of RPM (and, if
requested by the Agent, any insurance broker of such Borrower)
setting forth the nature and extent of all insurance maintained
by such Borrower in accordance with this Section 6.05.
6.06. PAYMENT OF OBLIGATIONS. Pay all taxes, assessments,
governmental charges and other obligations when due, except as
may be contested in good faith or those as to which a bona fide
dispute may exist and for which adequate reserves have been
provided if required by GAAP (or the comparable accounting
standards of such Borrower's country) and the non-payment of
which does not affect the Borrower's title to or right to use any
of its property.
6.07. COMPLIANCE WITH LAWS. Comply in all material
respects with all material regulations and requirements of any
Governmental Authority having jurisdiction over it or its
business, except such as may be contested in good faith or as to
which a bona fide dispute may exist.
6.08. INSPECTION OF PROPERTY AND BOOKS AND RECORDS.
Maintain proper books of record and account in conformity with
GAAP (or the comparable accounting standards of such Borrower's
country) consistently applied and permit representatives and
independent contractors of the Agent or any Lender to visit and
inspect any of its properties, to examine corporate, financial
and operating records, and make copies thereof or abstracts
therefrom, and to discuss its affairs, finances and accounts with
its respective officers and independent public accountants at
such reasonable times during normal business hours and as often
as may be reasonably desired.
6.09. ENVIRONMENTAL LAWS. Conduct its operations and keep
and maintain its property in material compliance with all
Environmental Laws.
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6.10. USE OF PROCEEDS. Use the proceeds of the Advances
solely to refinance Indebtedness and other general lawful
corporate purposes.
6.11. FURTHER ASSURANCES. Execute and deliver to the Agent
such further instruments and do such other further acts as the
Agent or the Lenders may reasonably request to carry out more
effectively the purposes of this Agreement and any related
documents.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Advance or other Obligation remains unpaid or
unsatisfied or the Commitment remains available, with respect to
Sections 7.01 through 7.06, each Borrower will not, and, will not
permit its Subsidiaries to, and with respect to Sections 7.07
through 7.10, RPM will not:
7.01. LIENS, ETC. Create or suffer to exist any Lien or
any other type of preferential arrangement, upon or with respect
to any of its properties, whether now owned or hereafter
acquired, or assign any right to receive income, in each case to
secure or provide for the payment of any Indebtedness of any
Person, other than the following ("Permitted Liens"):
(a) Purchase money liens or purchase money
security interests upon or in any property acquired or
held by such Borrower or Subsidiary in the ordinary
course of business to secure the purchase price of such
property or to secure Indebtedness incurred solely for
the purpose of financing the acquisition of such
property;
(b) Any Lien existing on the property of such
Borrower or Subsidiary on the Closing Date and any
extension, renewal or replacement Lien (each a
"Replacement Lien") arising out of the extension,
renewal or replacement of the related obligation
secured by such Lien, so long as any such Replacement
Lien does not extend to property not covered by the
Lien replaced or renewed;
(c) Liens for taxes, fees, assessments or other
governmental charges or statutory obligations which are
not delinquent or remain payable without penalty, or to
the extent that non-payment thereof is permitted by
Section 5.11, provided that no notice of Lien has been
filed or recorded under the Code;
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(d) Liens arising in the ordinary course of
business in connection with obligations that are not
overdue or which are being contested in good faith and
by appropriate proceedings, including, but not limited
to Liens under bid, performance and other surety bonds,
supersedes and appeal bonds, Liens on advance or
progress payments received from customers under
contracts for the sale, lease or license of goods,
software or services and upon the products being sold
or licensed, in each case securing performance of the
underlying contract or the repayment of such advances
in the event final acceptance of performance under such
contracts does not occur; and Liens upon funds
collected temporarily from others pending payment or
remittance on their behalf;
(e) Liens (other than any Lien imposed by ERISA)
required in ordinary course of business in connection
with workers' compensation, unemployment insurance and
other social security legislation;
(f) Easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in
amount, and which do not in any case materially detract from
the value of the property subject thereto or interfere with
the ordinary conduct of the businesses of such Borrower or
Subsidiary;
(g) Liens arising solely by virtue of any
statutory or common law provision relating to banker's
liens, rights of set-off or similar rights and remedies
as to deposit accounts or other funds maintained with a
creditor depository institution; PROVIDED THAT (i) such
deposit account is not a dedicated cash collateral
account and is not subject to restrictions against
access by such Borrower or Subsidiary in excess of
those set forth by regulations promulgated by the U.S.
Federal Reserve Board or other central bank or similar
Governmental Authority, and (ii) such deposit account
is not intended by such Borrower or Subsidiary to
provide collateral to the depository institution;
(h) Any Lien on any asset existing at the time
such asset is acquired by such Borrower or Subsidiary
or is merged into or consolidated with such Borrower or
Subsidiary and not created in contemplation of such
event and any Replacement Lien (as defined in clause
(b) above) arising out of the extension, renewal or
replacement of the related obligation secured by such
Lien, so long as any such Replacement Lien does not
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extend to property not covered by the Lien replaced or
renewed;
PROVIDED that the aggregate principal amount of the Indebtedness
secured by the Liens referred to in clauses (a), (b) and (h)
above shall not at any time exceed five percent of RPM's
Consolidated Total Assets.
7.02. MERGERS, CONSOLIDATIONS AND DISPOSITIONS OF ASSETS.
Sell, assign, lease, convey, transfer or otherwise dispose of
(whether in one or a series of related transactions) any of its
or its Subsidiaries' outstanding capital stock, or (other than in
the ordinary course of business) any of its property or assets
(including accounts and notes receivable, with or without
recourse) to any Person, or consolidate with or merge into any
other Person, PROVIDED, however, this Section 7.02 shall not
apply to or restrict:
(a) the merger or consolidation of such Borrower
or Subsidiary into RPM, or with or into any other
Borrower or Subsidiary of a Borrower or RPM;
(b) the transfer by such Borrower or Subsidiary
of any assets (upon voluntary liquidation or otherwise)
to RPM, a Borrower or a Wholly-Owned Subsidiary of RPM
or a Borrower;
(c) transfers of property not used or useful in
the business of the Borrowers and their Subsidiaries;
(d) the sale of equipment to the extent that such
equipment is exchanged for credit against the purchase
price of similar replacement equipment, or the proceeds
of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
(e) transfers of assets not otherwise permitted
hereunder (whether by merger, consolidation or
otherwise) occurring after the Closing Date which are
made for fair market value; PROVIDED, that (i) at the
time of any transfer, no Event of Default exists or
would result from such transfer and (ii) the aggregate
net book value of all assets so transferred by the
Borrowers and their Subsidiaries shall not exceed
$50,000,000 (or its equivalent in any Alternative
Currency) in any one fiscal year.
7.03. USE OF PROCEEDS. Use any portion of any Advance,
directly or indirectly, (i) to purchase or carry Margin Stock,
(ii) to repay or otherwise refinance Indebtedness of the
Borrowers, their Subsidiaries or others incurred to purchase or
carry Margin Stock, (iii) to extend credit for the purpose of
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purchasing or carrying any Margin Stock, or (iv) to acquire any
security in any transaction that is subject to Section 13 or 14
of the Exchange Act.
7.04. COMPLIANCE WITH ERISA.
(a) Terminate any Plan subject to Title IV of
ERISA so as to result in any material liability to any
Borrower or any ERISA Affiliate;
(b) Permit to exist any ERISA Event which is
reasonably likely to result in a material liability to
any members the Controlled Group;
(c) Make a complete or partial withdrawal (within
the meaning of ERISA Section 4201) from any
Multiemployer Plan so as to result in any material
Withdrawal Liabilities to any Borrower or any ERISA
Affiliate;
(d) Enter into any new Plan or amend any existing
Plan if doing so is reasonably likely to result in any
material increase in liability to any member of the
Controlled Group and is neither required by law nor
necessary to satisfy qualification requirements in the
case of a Qualified Plan; or
(e) Permit the present value of all
nonforfeitable accrued benefits under any Qualified
Plan (other than a Multiemployer Plan) to exceed, to a
materially greater extent than that disclosed in a
report prepared by an actuary with respect to the Plans
previously provided to the Lenders, the fair market
value of Plan assets allocable to such benefits, if the
liability accruing to any Borrower as a result of the
excess would result in a Material Adverse Effect,
PROVIDED, that for purposes of this clause (e)
determination of such excess at any time will be made
on a Plan termination basis applying the actuarial
factors that would be used by the PBGC either as of the
Closing Date or as of the date in question, whichever
results in a smaller excess, and will otherwise be
based on the information set forth in the most recently
completed actuarial valuation with respect to such
Plan.
7.05. ACCOUNTING CHANGES. Make any material change in
accounting treatment or reporting practices, except (a) as
required or permitted by GAAP (or the comparable accounting
standards of such Borrower or Subsidiary's country) and (b) as
disclosed in the notes accompanying the financial statements
delivered pursuant to Sections 6.01(a) and (b) hereof.
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7.06. CONTRACTS OF SUBSIDIARIES. Enter into any agreement
restricting the ability of any Subsidiary to pay dividends to any
Borrower or any Subsidiary of any Borrower.
7.07. MINIMUM TANGIBLE NET WORTH. Permit its Consolidated
Tangible Net Worth to be less than $240,000,000.
7.08. LEVERAGE RATIO. Permit the ratio of (a) its
Consolidated Total Liabilities MINUS the outstanding principal
balance of the RPM Subordinated Debt to (b) its Consolidated
Tangible Net Worth to exceed 1.5 to 1.
7.09. RATIO OF LONG-TERM DEBT TO CAPITALIZATION. Permit
its Consolidated Long-Term Debt to exceed 60% of its Consolidated
Capitalization.
7.10. RATIO OF EBIT TO INTEREST EXPENSE. Permit its ratio
of (a) EBIT to (b) Consolidated Interest Expense to be less than
3.00 to 1.00.
ARTICLE VIII
EVENTS OF DEFAULT
8.01. EVENTS OF DEFAULT. Any of the following shall
constitute an "Event of Default":
(a) A Borrower fails to pay any principal of, or
interest on, any Advance when the same becomes due and
payable; or
(b) Any representation or warranty made by a Borrower
herein or in any document delivered to the Lenders in
connection with this Agreement proves to have been incorrect
in any material respect when made; or
(c) A Borrower fails to perform or observe any other
term, covenant or agreement contained in this Agreement on
its part to be performed or observed and the failure to
perform or observe such other term, covenant or agreement
remains unremedied for 30 days; or
(d) A Borrower or any of its Subsidiaries fails to pay
any principal of or premium or interest on any Indebtedness
which is outstanding in a principal amount of at least
$10,000,000 (or its equivalent in any Alternative Currency)
in the aggregate (but excluding Indebtedness arising under
this Agreement) of such Borrower or such subsidiary (as the
case may be), when the same becomes due and payable (whether
by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure continues after the
applicable grace period, if any, specified in the agreement
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or instrument relating to such Indebtedness; or any other
event occurs or condition exists under any agreement or
instrument relating to any such Indebtedness and continues
after the applicable grace period, if any, specified in such
agreement or instrument expires, if the effect of such event
or condition is to accelerate, or to permit the acceleration
of, the maturity of such Indebtedness; or any such
Indebtedness is declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(e) Any judgment or order for the payment of money in
excess of $10,000,000 (or its equivalent in any Alternative
Currency) is rendered against a Borrower or any of its
Subsidiaries and either (i) enforcement proceedings are
commenced by any creditor upon such judgment or order or
(ii) there exists any period of 10 consecutive days during
which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, is not in effect;
or
(f) Any of the following events occurs which,
individually or in the aggregate, could reasonably be
expected to result in liability which has a Material Adverse
Effect: (i) a member of the Controlled Group fails to pay
when due, after the expiration of any applicable grace
period, any installment payment with respect to its
withdrawal liability under a Multiemployer Plan unless the
obligation to make such payment or the amount thereof is
disputed in good faith by the Controlled Group member and
such member is pursuing in a timely manner its legal right
to object thereto; (ii) a Borrower or an ERISA Affiliate
fails to satisfy its contribution requirements under Section
412(c)(11) of the Code, whether or not it has sought a
waiver under Section 412(d) of the Code; (iii) an ERISA
Event involving the withdrawal by a Borrower or an ERISA
Affiliate from a Plan with respect to which it is a
"substantial employer" (as defined in Section 4001(a)(2) or
Section 4062(e) of ERISA), imposing liability on the
withdrawing employer for its proportionate share of that
Plan's Unfunded Pension Liabilities; (iv) an ERISA Event
involving the complete or partial withdrawal by a Borrower
or an ERISA Affiliate from a Multiemployer Plan, imposing
liability on the withdrawing employer for Withdrawal
Liabilities and the amount of the required annual Withdrawal
Liabilities payment materially exceeds the average annual
amount of contributions to the Multiemployer Plan by the
withdrawing employer for the preceding calendar year or the
average of such contributions for the five preceding
calendar years, whichever is greater; (v) an ERISA Event not
described in clause (iii) or (iv) with respect to a Plan or
Plans, resulting in the imposition of Unfunded Pension
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<PAGE> 46
Liabilities on a Borrower or a Controlled Group member;
(vi) a Plan that is intended to be qualified under Section
401(a) of the Code has been finally determined to have lost
its qualification and all opportunity for appeal or
correction has lapsed; (vii) the commencement or increase of
contributions to, or the adoption of or the amendment of, a
Qualified Plan or a Plan providing for welfare benefits to
retirees of a Borrower or its ERISA Affiliates by a member
of the Controlled Group which results in a net increase in
current unfunded liabilities to the Controlled Group (as
disclosed in the actuarial reports or financial statements
with respect to the Plans previously provided to the
Lenders); (viii) any member of the Controlled Group becomes
liable for a tax under Code Section 4975 in connection with
a non-exempt prohibited transaction; (ix) a violation of
section 404, 405 or 406 of ERISA or the exclusive benefit
rule under section 401(a) of the Code; or (x) any member of
the Controlled Group is assessed a tax under section 4980B
of the Code unless the obligation to pay such tax or the
amount thereof is disputed in good faith by the Controlled
Group member and such member is pursuing in a timely manner
its legal right to object thereto; or
(g) RPM fails in any material respect to perform or
observe any term, covenant or agreement under its guaranty
in Article III; or such guaranty is for any reason partially
(including with respect to future advances) or wholly
revoked or invalidated, or otherwise ceases to be in full
force and effect, or RPM or any other Person contests in any
manner the validity or enforceability thereof or denies that
it has any further liability or obligation thereunder; or
(h) RPM (i) ceases or fails to be solvent, or
generally fails to pay, or admits in writing its inability
to pay, its debts as they become due, subject to applicable
grace periods, if any, whether at stated maturity or
otherwise, (ii) voluntarily ceases to conduct its business
in the ordinary course, (iii) commences any Insolvency
Proceeding with respect to itself; or (iv) takes any action
to effectuate or authorize any of the foregoing; or
(i) One or more of the following occurs: (x) an
involuntary Insolvency Proceeding is commenced or filed
against a Borrower or any Borrower's Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of a
Borrower or any Borrower's Subsidiaries' properties, and any
such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded
within 60 days after commencement, filing or levy; (y) a
Borrower or any Borrower's Subsidiary admits the material
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<PAGE> 47
allegations of a petition against it in any Insolvency
Proceeding, or an order for relief (or similar order under
non-U.S. law) is ordered in any Insolvency Proceeding; or
(z) a Borrower or any Borrower's Subsidiary acquiesces in
the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a
substantial portion of its property or business; or
(j) RPM, concurrently with the receipt by any Borrower
of the initial Advance hereunder, fails to satisfy in full
all its obligations to CLCB and CLB pursuant to that certain
$53,000,000 multi-currency revolver dated May 31, 1991 among
RPM, First National Bank of Chicago as agent and certain
other banks as direct participants, including CLCB and CLB.
8.02. REMEDIES. If any Event of Default occurs, the Agent
shall, at the request of, or may, with the consent of, all the
Lenders,
(a) declare the Commitment of the Lenders to make
Advances to be terminated, whereupon such Commitment shall
forthwith be terminated;
(b) declare the unpaid principal amount of all
outstanding Advances, all interest accrued and unpaid
thereon, and all other amounts owing or payable hereunder or
under any other related document to be immediately due and
payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the
Borrowers; and
(c) exercise on behalf of itself and the Lenders all
rights and remedies available to it and the Lenders under
this Agreement or applicable law;
PROVIDED, HOWEVER, that upon the occurrence of any event
specified in paragraph (h) or (i) of Section 8.01 above (in the
case of clause (x) of paragraph (i), upon the expiration of the
60-day period mentioned therein), the obligation of each Lender
to make Advances shall automatically terminate without notice to
the Borrowers and the unpaid principal amount of all outstanding
Advances and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the
Agent or any Lender and without notice to the Borrowers; and
PROVIDED FURTHER, that in any case, the Lenders may, in their
sole and absolute discretion, waive any Event of Default.
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ARTICLE IX
THE AGENT
9.01. AUTHORIZATION AND ACTION. Each Lender hereby
appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as
are delegated to the Agent by the terms hereof, together with
such powers as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement (including,
without limitation, enforcement or collection of the Indebtedness
resulting from the Advances), the Agent shall not be required to
exercise any discretion or take any action, but shall be required
to act or to refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the instructions of all
the Lenders; PROVIDED, HOWEVER, that the Agent shall not be
required to take any action which exposes the Agent to personal
liability or which is contrary, in the Agent's opinion, to this
Agreement or applicable law. The Agent agrees to give to each
Lender prompt notice of each notice given to it by the Borrower
pursuant to the terms of this Agreement.
9.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any of
its directors, officers, agents or employees shall be liable for
any action taken or omitted to be taken by it or them under or in
connection with this Agreement, except for its or their own gross
negligence or willful misconduct. Without limitation of the
generality of the foregoing, the Agent: (a) may consult with
legal counsel (including counsel for any Borrower), independent
public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel,
accountants or experts; (b) makes no warranty or representation
to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement; (c) shall not
have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this
Agreement on the part of any Borrower or to inspect the property
(including the books and records) of the Borrowers; (d) shall not
be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of
this Agreement or any other instrument or document furnished
pursuant hereto; and (e) shall incur no liability under or in
respect of this Agreement by acting upon any notice, consent,
certificate or other instrument or writing (which may be by
telecopier, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
9.03. CLCB AND AFFILIATES. CLCB and its affiliates may
accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with,
the Borrowers, any of their Subsidiaries and any Person who may
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<PAGE> 49
do business with or own securities of any Borrower or any such
Subsidiary, all as if CLCB was not the Agent and without any duty
to account therefor to the Lenders.
9.04. INDEMNIFICATION. The Lenders agree to indemnify the
Agent (to the extent not reimbursed by the Borrowers), ratably
according to the respective aggregate principal amount of
Advances then owing to each of them (or if no such Advances are
at the time outstanding, ratably according to their respective
Allocation Percentages), from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or
asserted against the Agent in any way relating to or arising out
of this Agreement or any action taken or omitted by the Agent
under this Agreement, PROVIDED that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Agent promptly upon demand for its
ratable share (pursuant to its Allocation Percentage) of any
out-of-pocket expenses (including counsel and paralegal fees)
incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the
Agent is not reimbursed for such expenses by the Borrowers.
ARTICLE X
MISCELLANEOUS
10.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by any
Borrower therefrom, shall in any event be effective unless the
same is in writing and signed by all the Lenders, and then such
waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
10.02. NOTICES, ETC.
(a) All notices and other communications provided for
hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed,
telecopied, telegraphed, telexed, cabled or delivered, if to
a Borrower, at the address listed beneath its signature on
the signature pages hereof; if to any Lender, at the address
for notices specified beneath its name on the signature
pages hereof; and if to the Agent, at its address for
notices listed beneath its signature on the signature pages
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<PAGE> 50
hereof. Any party hereto may in a written notice to the
other parties change its address or other information
relating to payment. All such notices and communications
shall, when mailed, telecopied, telegraphed, telexed or
cabled, be effective when deposited in the mails,
telecopied, delivered to the telegraph company, confirmed by
telex answerback or delivered to the cable company,
respectively, except that notices and communications to the
Agent pursuant to Article II or IX shall not be effective
until received by the Agent.
(b) The Borrowers acknowledge and agree that any
agreement of the Agent and the Lenders in Article II herein
to receive certain notices by telephone and facsimile is
solely for the convenience and at the request of the
Borrowers. The Agent and the Lenders shall be entitled to
rely on the authority of any Person purporting to be a
Person authorized by RPM (pursuant to the certificate
described in Section 4.01(e) hereof or any written revision
thereto received by the Agent from RPM) to give such notice
and the Agent and the Lenders shall not have any liability
to the Borrowers or any other Person on account of any
action taken or not taken by the Agent or the Lenders in
reliance upon such telephonic or facsimile notice. The
obligation of the Borrowers to repay the Advances shall not
be affected in any way or to any extent by any failure by
the Agent and the Lenders to receive written confirmation of
any telephonic or facsimile notice or the receipt by the
Agent and the Lenders of a confirmation which is at variance
with the terms understood by the Agent and the Lenders to be
contained in the telephonic or facsimile notice.
10.03. NO WAIVER; REMEDIES. No failure on the part of any
Lender or the Agent to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other
or further exercise thereof or the exercise of any other right.
The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
10.04. EXPENSES. The Borrowers shall pay or reimburse each
Lender and the Agent within thirty (30) Business Days after
demand for all costs and expenses incurred by them in connection
with the enforcement, attempted enforcement, or preservation of
any rights or remedies (including in connection with any
"workout" or restructuring regarding the Advances, and including
in any Insolvency Proceeding or appellate proceeding) under this
Agreement or with any investigation, litigation or proceeding
(including any Insolvency Proceeding, Environmental Claim
proceedings or appellate proceeding) related to this Agreement or
the Advances or the use of the proceeds thereof, including all
fees and disbursements of any law firm or other external counsel,
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<PAGE> 51
the allocated cost of internal legal services and all
disbursements of internal counsel incurred by the Agent and any
Lender.
10.05. RIGHT OF SET-OFF. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the
making of the request or the granting of the consent specified by
Section 8.02 to authorize the Agent to declare the Advances due
and payable pursuant to the provisions of Section 8.02, each
Lender is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of the
Borrowers against any and all of the obligations of the Borrowers
now or hereafter existing under this Agreement. Each Lender
agrees promptly to notify the Borrowers after any such set-off
and application made by such Lender, PROVIDED that the failure to
give such notice shall not affect the validity of such set-off
and application. The rights of each Lender under this section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Lender may have.
10.06. JUDGMENT CURRENCY CONVERSIONS.
(a) If for the purposes of obtaining judgment in any
court it is necessary to convert a sum due hereunder in any
currency (the "Original Currency"), into another currency
(the "Other Currency"), the parties hereto agree, to the
fullest extent that they may effectively do so, that the
rate of exchange used shall be that at which in accordance
with normal banking procedures Credit Lyonnais Belgium could
purchase the Original Currency with the Other Currency in
Brussels, Belgium on the second Business Day preceding that
on which final judgment is given.
(b) The obligation of any Borrower in respect of any
sum due in the Original Currency from it to any Lender or
the Agent hereunder held by such Lender shall,
notwithstanding any judgment in any Other Currency, be
discharged only to the extent that on the Business Day
following receipt by such Lender or the Agent (as the case
may be) of any sum adjudged to be so due in such Other
Currency, such Lender or the Agent (as the case may be) may
in accordance with normal banking procedures purchase
Dollars with such Other Currency; if the amount of the
Original Currency so purchased is less than the sum
originally due to such Lender or the Agent (as the case may
be) in the Original Currency, the Borrowers agree, as a
separate obligation and notwithstanding any such judgment,
to indemnify such Lender or the Agent (as the case may be)
against such loss, and if the amount of the Original
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<PAGE> 52
Currency so purchased exceeds the sum originally due to any
Lender or the Agent (as the case may be) in the Original
Currency, such Lender or the Agent (as the case may be)
agrees to remit such excess to the Borrower or Borrowers
making the payment.
10.07. BINDING EFFECT. This Agreement shall become
effective when it shall have been executed by the Borrowers and
the Agent and when the Agent has been notified by each Lender
named on the signature pages hereof that such Lender has executed
it and thereafter shall be binding upon and inure to the benefit
of the Borrowers, the Agent and each Lender and their respective
successors and assigns, except that no Borrower shall have the
right to assign its rights hereunder or any interest herein
without the prior written consent of the Lenders.
10.08. PARTICIPATIONS.
(a) Each Lender may sell participations to one or more
banks or other entities in or to all or a portion of its
rights and obligations under this Agreement (including,
without limitation, all or a portion of the Advances owing
to it); PROVIDED, HOWEVER, that (i) such Lender's
obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such
obligations, and (iii) the Borrowers, the Agent and the
other Lenders shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and
obligations under this Agreement. The Borrowers agree that
any participant may exercise rights of set-off against
deposits of the Borrowers as if it were a Lender hereunder.
(b) Any Lender may, in connection with any
participation or proposed participation pursuant to this
Section 10.10, disclose to the participant or proposed
participant, any information relating to the Borrowers
furnished to such Lender by or on behalf of any Borrower;
PROVIDED that, prior to any such disclosure, the participant
or proposed participant shall agree to preserve the
confidentiality of any confidential information relating to
the Borrowers received by it from such Lender.
10.09. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
10.10. SEVERABILITY. The illegality or unenforceability of
any provision of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the
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<PAGE> 53
legality or enforceability of the remaining provisions of this
Agreement or any instrument or agreement required hereunder.
10.11. GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT AND ANY OTHER RELATED DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR OF THE
UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE
BORROWERS, THE AGENT AND THE LENDERS CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE BORROWERS, THE
AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING
IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY
DOCUMENT RELATED HERETO. THE BORROWERS, THE AGENT AND THE
LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER
MEANS PERMITTED BY ILLINOIS LAW.
10.12. WAIVER OF JURY TRIAL. THE BORROWERS, THE LENDERS
AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
OR RELATED TO THIS AGREEMENT, ANY OTHER RELATED DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT
TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
(The remainder of this page is intentionally left blank)
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<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
RPM, INC.
By: /S/ Frank C. Sullivan
------------------------------
Name: Frank C. Sullivan
Title: Vice President
ADDRESS FOR NOTICES:
RPM, Inc.
2628 Pearl Road
P. O. Box 777
Medina, Ohio 44258
Attention: Mr. Frank C. Sullivan
Vice President and
Chief Financial
Officer
Facsimile: (216) 225-8743
Telephone: (216) 273-8808
WITH A COPY TO:
RPM, Inc.
2628 Pearl Road
P. O. Box 777
Medina, Ohio 44258
Attention: Paul A. Granzier, Esq.
Vice President, General
Counsel and Secretary
Facsimile: (216) 225-8743
Telephone: (216) 273-8838
(signatures continued on next page)
<PAGE> 55
RPOW (FRANCE) S.A.
By: /S/ Frank C. Sullivan
------------------------------
Name: Frank C. Sullivan
Title: Director General
--------------------------
ADDRESS FOR NOTICES:
RPOW (France) S.A.
c/o RPM, Inc.
2628 Pearl Road
P. O. Box 777
Medina, Ohio 44258
Attention: Mr. Frank C. Sullivan
Vice President and
Chief Financial
Officer
Facsimile: (216) 225-8743
Telephone: (216) 273-8808
WITH A COPY TO:
RPOW (France) S.A.
c/o RPM, Inc.
2628 Pearl Road
P. O. Box 777
Medina, Ohio 44258
Attention: Paul A. Granzier, Esq.
Vice President, General
Counsel and Secretary
Facsimile: (216) 225-8743
Telephone: (216) 273-8838
(signatures continued on next page)
<PAGE> 56
RPM EUROPE B.V.
By:/S/ Frank C. Sullivan
-----------------------------
Name: Frank C. Sullivan
Title: Managing Director
-------------------------
ADDRESS FOR NOTICES:
RPM Europe B.V.
c/o RPM, Inc.
2628 Pearl Road
P. O. Box 777
Medina, Ohio 44258
Attention: Mr. Frank C. Sullivan
Vice President and
Chief Financial
Officer
Facsimile: (216) 225-8743
Telephone: (216) 273-8808
WITH A COPY TO:
RPM Europe B.V.
c/o RPM, Inc.
2628 Pearl Road
P. O. Box 777
Medina, Ohio 44258
Attention: Paul A. Granzier, Esq.
Vice President, General
Counsel and Secretary
Facsimile: (216) 225-8743
Telephone: (216) 273-8838
(signatures continued on next page)
<PAGE> 57
RADIANT COLOR N.V.
By: /S/ Frank C. Sullivan
-----------------------------
Name: Frank C. Sullivan
Title: Director
--------------------------
ADDRESS FOR NOTICES:
Radiant Color N.V.
c/o RPM, Inc.
2628 Pearl Road
P. O. Box 777
Medina, Ohio 44258
Attention: Mr. Frank C. Sullivan
Vice President and
Chief Financial
Officer
Facsimile: (216) 225-8743
Telephone: (216) 273-8808
WITH A COPY TO:
Radiant Color N.V.
c/o RPM, Inc.
2628 Pearl Road
P. O. Box 777
Medina, Ohio 44258
Attention: Paul A. Granzier, Esq.
Vice President, General
Counsel and Secretary
Facsimile: (216) 225-8743
Telephone: (216) 273-8838
(signatures continued on next page)
<PAGE> 58
CREDIT LYONNAIS CHICAGO BRANCH, as
Agent
By: Mary Ann Klemm
Name: Mary Ann Klemm
Title: Vice President
ADDRESS FOR NOTICES:
227 West Monroe Street, Suite 3800
Chicago, Illinois 60606
Attention: Mr. Brian Jackson
Facsimile: (312) 641-0527
Telephone: (312) 220-7309
(signatures continued on next page)
<PAGE> 59
CREDIT LYONNAIS CAYMAN ISLAND BRANCH,
as a Lender
By:/S/ Mary Ann Klemm
--------------------------------
Name: Mary Ann Klemm
Title: Authorized Signatory
LENDING OFFICE
ADDRESS FOR NOTICES:
Credit Lyonnais Cayman Island Branch
c/o Credit Lyonnais Chicago Branch
227 West Monroe Street, Suite 3800
Chicago, Illinois 60606
Attention: Mr. Brian Jackson
Facsimile: (312) 641-0527
Telephone: (312) 220-7309
(signatures continued on next page)
<PAGE> 60
CREDIT LYONNAIS BELGIUM, as a Lender
By: /S/ J. Borremans /S/ J. M. Winand
------------------ -----------------------
Name: J. Borremans J. M. Winand
--------------- -----------------------
Title: Ex-Director Invest. Banking Officer
--------------- -----------------------
LENDING OFFICE
ADDRESS FOR NOTICES:
Credit Lyonnais Belgium S.A.
17 Marnix Avenue
1050 Brussels, Belgium
Attention: Mr. Thierry Mathieu
Facsimile: (32) 2 5134023
Telephone: (32) 2 5160953
WITH A COPY TO:
Credit Lyonnais Belgium S.A.
17 Marnix Avenue
1050 Brussels, Belgium
Attention: Mr. Philippe Mallien
Facsimile: (32) 2 5160940
Telephone: (32) 2 5160617
(last signature page)
<PAGE> 1
EXHIBIT 10.1.1
---------------
AMENDMENT TO AMENDED EMPLOYMENT AGREEMENT
-----------------------------------------
THIS AMENDMENT is made and entered into on this 20th day of July, 1994 at
Medina, Ohio, by and between RPM, INC. (hereinafter referred to as the
"Company") and THOMAS C. SULLIVAN (hereinafter referred to as "Sullivan"):
W I T N E S S E T H:
--------------------
WHEREAS, Sullivan is considered a key employee of the Company; and
WHEREAS, Sullivan and the Company entered into a certain Amended Employment
Agreement, dated as of July 22, 1981 and last amended as of July 21, 1993 (the
"Employment Agreement"), to insure Sullivan's continued employment with the
Company; and
WHEREAS, it is the desire of the Company and Sullivan to further amend the
Employment Agreement in accordance with the terms hereof; and
WHEREAS, Paragraph 12 of the Employment Agreement requires that any such
Amendment be in writing and properly executed;
NOW, THEREFORE, in consideration of the premises and the mutual
understandings of the parties, IT IS AGREED, as follows:
1. EMPLOYMENT TERM. Paragraph 1 of the Employment Agreement shall be
deleted in its entirety and amended and restated to provide in its entirety as
follows:
<PAGE> 2
TERM OF EMPLOYMENT. The Company hereby agrees to continue to employ
Sullivan, and Sullivan hereby agrees to continue to serve the Company, on
the terms and conditions set forth herein for the period commencing
retroactive to June 1, 1994 (the "Effective Date"), and expiring on the
fifth anniversary of the Effective Date (unless sooner terminated as
hereinafter set forth).
2. COMPENSATION. Paragraph 4(a) of the Employment Agreement shall be
deleted in its entirety and amended and restated to provide in its entirety as
follows:
BASE SALARY. Sullivan shall receive a base salary at the rate of not less
than Six Hundred and Seventy-Five Thousand Dollars ($675,000) per annum
("Base Salary"), payable in substantially equal monthly installments at the
end of each month during the period of Sullivan's employment hereunder. It
is contemplated that annually in July of each year the Compensation
Committee of the Board of Directors will review Sullivan's Base Salary and
other compensation during the period of his employment hereunder and, at the
discretion of the Compensation Committee, it may increase his Base Salary
and other compensation based upon his performance, then generally prevailing
industry salary scales, the Company's results of operation, and other
relevant factors. Any increase in Base Salary or other compensation shall
in no way limit or reduce any other obligation of the Company hereunder and,
once established at an increased specified rate, Sullivan's Base Salary
hereunder shall not be reduced without his written consent.
3. EFFECTIVE DATE. The effective date of this Amendment shall be June 1,
1994, and as such, the increase in compensation set forth in Paragraph 2 shall
be retroactively applied.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Amendment to the
Employment Agreement on the date and at the place first above written.
IN THE PRESENCE OF: RPM, INC.
____________________________ By:/s/ James A. Karman
----------------------------
James A. Karman, President
And:/s/ Paul A. Granzier
---------------------------
Paul A. Granzier, Secretary
The "Company"
____________________________ /s/ Thomas C. Sullivan
---------------------------
Thomas C. Sullivan
"Sullivan"
373/06821CUA.350
-3-
<PAGE> 1
EXHIBIT 10.2.1
---------------
AMENDMENT TO AMENDED EMPLOYMENT AGREEMENT
-----------------------------------------
THIS AMENDMENT is made and entered into on this 20th day of July, 1994 at
Medina, Ohio, by and between RPM, INC. (hereinafter referred to as the
"Company") and JAMES A. KARMAN (hereinafter referred to as "Karman"):
W I T N E S S E T H:
--------------------
WHEREAS, Karman is considered a key employee of the Company; and
WHEREAS, Karman and the Company entered into a certain Amended Employment
Agreement, dated as of July 22, 1981 and last amended as of July 21, 1993 (the
"Employment Agreement"), to insure Karman's continued employment with the
Company; and
WHEREAS, it is the desire of the Company and Karman to amend the Employment
Agreement in accordance with the terms hereof; and
WHEREAS, Paragraph 12 of the Employment Agreement requires that any such
Amendment be in writing and properly executed;
NOW, THEREFORE, in consideration of the premises and the mutual
understandings of the parties, IT IS AGREED, as follows:
1. EMPLOYMENT TERM. Paragraph 1 of the Employment Agreement shall be
deleted in its entirety and amended and restated to provide in its entirety as
follows:
<PAGE> 2
TERM OF EMPLOYMENT. The Company hereby agrees to continue to employ
Karman, and Karman hereby agrees to continue to serve the Company, on the
terms and conditions set forth herein for the period commencing
retroactive to June 1, 1994 (the "Effective Date"), and expiring on the
fifth anniversary of the Effective Date (unless sooner terminated as
hereinafter set forth).
2. COMPENSATION. Paragraph 4(a) of the Employment Agreement shall be
deleted in its entirety and amended and restated to provide in its entirety as
follows:
BASE SALARY. Karman shall receive a base salary at the rate of not less
than Five Hundred Thirty Thousand Dollars ($530,000) per annum ("Base
Salary"), payable in substantially equal monthly installments at the end of
each month during the period of Karman's employment hereunder. It is
contemplated that annually in July of each year the Compensation Committee
of the Board of Directors will review Karman's Base Salary and other
compensation during the period of his employment hereunder and, at the
discretion of the Compensation Committee, it may increase his Base Salary
and other compensation based upon his performance, then generally prevailing
industry salary scales, the Company's results of operation, and other
relevant factors. Any increase in Base Salary or other compensation shall
in no way limit or reduce any other obligation of the Company hereunder and,
once established at an increased specified rate, Karman's Base Salary
hereunder shall not be reduced without his written consent.
3. EFFECTIVE DATE. The effective date of this Amendment shall be June 1,
1994, and as such, the increase in compensation set forth in Paragraph 2 shall
be retroactively applied.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Amendment to the
Employment Agreement on the date and at the place first above written.
IN THE PRESENCE OF: RPM, INC.
____________________________ By:/s/ Thomas C. Sullivan
----------------------------
Thomas C. Sullivan, Chairman
and Chief Executive Officer
And:/s/ Paul A. Granzier
---------------------------
Paul A. Granzier, Secretary
The "Company"
____________________________ /s/ James A. Karman
---------------------------
James A. Karman
"Karman"
373/06821CTA.350
-3-
<PAGE> 1
EXHIBIT 10.4.1
---------------
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
THIS AMENDMENT is made and entered into on this 20th day of July, 1994 at
Medina, Ohio, by and between RPM, INC. (hereinafter referred to as the
"Company") and JOHN H. MORRIS, JR. (hereinafter referred to as "Morris"):
W I T N E S S E T H:
--------------------
WHEREAS, Morris is considered a key employee of the Company; and
WHEREAS, Morris and the Company entered into a certain Employment Agreement,
originally dated as of July 19, 1988 and last amended as of July 21, 1993 (the
"Employment Agreement"), to insure Morris's continued employment with the
Company; and
WHEREAS, it is the desire of the Company and Morris to amend the Employment
Agreement in accordance with the terms hereof; and
WHEREAS, Paragraph 11 of the Employment Agreement requires that any such
Amendment be in writing and properly executed;
NOW, THEREFORE, in consideration of the premises and the mutual
understandings of the parties, IT IS AGREED, as follows:
1. EMPLOYMENT TERM. Paragraph 1 of the Employment Agreement shall be
deleted in its entirety and amended and restated to provide in its entirety as
follows:
<PAGE> 2
TERM OF EMPLOYMENT. The Company hereby agrees to continue to employ
Morris, and Morris hereby agrees to continue to serve the Company, on the
terms and conditions set forth herein for the period commencing
retroactive to June 1, 1994 (the "Effective Date"), and expiring on July
31, 1995 (unless sooner terminated as hereinafter set forth).
2. COMPENSATION. Paragraph 4(a) of the Employment Agreement shall be
deleted in its entirety and amended and restated to provide in its entirety as
follows:
BASE SALARY. Morris shall receive a base salary at the rate of not less
than Three Hundred Twenty Thousand Dollars ($320,000) per annum ("Base
Salary"), payable in substantially equal monthly installments at the end of
each month during the period of Morris' employment hereunder. It is
contemplated that annually in July of each year the Compensation Committee
of the Board of Directors will review Morris' Base Salary and other
compensation during the period of his employment hereunder and, at the
discretion of the Compensation Committee, it may increase his Base Salary
and other compensation based upon his performance, then generally prevailing
industry salary scales, the Company's results of operation, and other
relevant factors. Any increase in Base Salary or other compensation shall
in no way limit or reduce any other obligation of the Company hereunder and,
once established at an increased specified rate, Morris' Base Salary
hereunder shall not be reduced without his written consent.
3. EFFECTIVE DATE. The effective date of this Amendment shall be June 1,
1994, and as such, the increase in compensation set forth in Paragraph 2 shall
be retroactively applied.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Amendment to the
Employment Agreement on the date and at the place first above written.
IN THE PRESENCE OF: RPM, INC.
____________________________ By:/s/ Thomas C. Sullivan
----------------------------
Thomas C. Sullivan, Chairman
and Chief Executive Officer
And:/s/ Paul A. Granzier
---------------------------
Paul A. Granzier, Secretary
The "Company"
____________________________ /s/ John H. Morris, Jr.
---------------------------
John H. Morris, Jr.
"Morris"
373/06821CVA.350
-3-
<PAGE> 1
EXHIBIT 10.9
DEFERRED COMPENSATION AGREEMENT
-------------------------------
As of ______________, 19__, RPM, INC., an Ohio corporation
(the "Company") and ____________________, a Director of the Company (the
"Director"), hereby agree as follows:
I. PURPOSE - The purpose of this Agreement is to establish a
Deferred Compensation Plan (the "Plan") for the Director,
pursuant to which the Director's cash compensation for
services to the Company shall be credited to the Director,
either as a cash allotment or a stock allotment, as provided
in Section VI hereof, and payment thereof shall be deferred
until distribution as provided in Section IX hereof.
II. PARTICIPATION - The Director may elect to participate in the
Plan effective only as of the beginning of the Company's
fiscal year next following the date of notice of such
election. Such notice shall be in writing and delivered to
the Secretary of the Company not later than fifteen (15) days
prior to the first day of such fiscal year. Such notice shall
include the Director's election to establish either a cash
allotment or a stock allotment, which election shall be
irrevocable with respect to any given fiscal year. The
Director shall have the right during the term of this
Agreement to change such election from a cash allotment to a
stock allotment, or from a stock allotment to a cash
allotment, as the case may be, effective, however, only with
respect to the Director's cash compensation for services to
the Company for the fiscal year next following the date of
notice of such change. Such notice shall be in writing and
delivered to the Secretary of the Company not later than six
(6) months prior to the first day of such fiscal year.
III. DUTIES AND TERMINATION DATE - The Director will serve as a
member of the Company's Board of Directors, and perform
faithfully the duties of a member of the Board, including
service on Committees of the Board and service in an advisory
and consultative capacity to the Chairman and Officers of the
Company at such times as may be reasonably requested. This
Agreement will terminate upon the date of occurrence of any of
the following events (the "Termination Date"):
A. The date the Director ceases to hold office as a
member of the Company's Board of Directors, or
B. The date of death of the Director, or
C. The date the Director elects in writing to terminate
this Agreement.
<PAGE> 2
IV. COMPENSATION - The Director shall be compensated for serving
as a member of the Board, for attendance at special meetings
of the Board, and meetings of Committees of the Board, and,
where applicable, for serving as Chairman of a Committee of
the Board, pursuant to fees established from time to time by
the Board of Directors for such services; provided, however,
that such compensation shall not be paid, set aside or
distributed until at least six (6) months after the
Termination Date, in accordance with Section IX hereof.
V. EXPENSE REIMBURSEMENT - The Director shall be reimbursed in
cash, on a current basis, for all travel and incidental
expenses incurred for the benefit of the Company, whether in
connection with attendance at meetings of the Company's Board
of Directors or otherwise.
VI. DEFERRED COMPENSATION ACCOUNT - The Company shall establish a
Deferred Compensation Account (the "Account") for the
Director. As of the last day of the Company's fiscal quarter
during which this Agreement is effective, and as of the last
day of each applicable succeeding fiscal quarter during the
term of this Agreement, the Company shall credit to the
Account the amount, in cash or stock equivalents, as
hereinafter described, of the Director's compensation payable
for services during such fiscal quarter.
VII. CASH OR STOCK ELECTION
A. The entire amount credited to the Account for each
fiscal quarter shall be credited either as a cash
allotment or as a stock allotment in accordance with
the Director's written election.
B. If a cash allotment is elected, the Account shall be
credited with the dollar amount of the allotment, and
the Account shall be credited, at the end of each
fiscal quarter during the term of this Agreement,
with interest at the rate equal to the prime interest
rate of National City Bank (Cleveland) in effect on
the last day of the quarter.
C. If a stock allotment is elected, the Account shall be
credited with a stock equivalent which shall be equal
to the number of shares (computed to the nearest
one-hundredth of a share) of the Company's Common
Shares (the "Common Shares") that could be purchased
with the dollar amount of the allotment at the last
sales price of the Common Shares on the
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<PAGE> 3
NASDAQ National Market System, or the closing price
of such shares on the principal exchange on which
such shares are listed, as the case may be, on the
last trading day of the applicable quarter of the
Company.
D. On the last day of each fiscal quarter during the
term of this Agreement, the Account shall be credited
with an additional stock equivalent which shall be
equal to the number of Common Shares (computed to the
nearest one-hundredth of a share) that could be
purchased with the dollar amount determined by
multiplying the dividends paid per Common Share to
shareholders of record during such fiscal quarter, by
the number of shares, including fractional shares, in
the Account at the beginning of such fiscal quarter,
with appropriate adjustment to reflect any increase
or decrease during the period in the number of shares
in the Account as a result of the application of
paragraph E of this Section VII.
E. In the event of any change in the Common Shares upon
which the stock equivalency hereunder is based, by
reason of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split,
combination or exchange of shares, or other change in
the corporate structure, the number of shares
credited to the Director shall be appropriately
adjusted.
F. THIS IS A CASH DEFERRED COMPENSATION PLAN, AND UNDER
NO CIRCUMSTANCES SHALL THE DIRECTOR'S DEFERRED
COMPENSATION BE PAID IN ACTUAL COMMON SHARES OF THE
COMPANY.
VIII. FINAL ACCOUNT BALANCE - The balance in the Account on the Termination
Date (the "Final Account Balance") shall be (i) in the case of cash
allotment, the cash balance on the Termination Date, and (ii) in the
case of stock allotment, the amount of cash equal to the aggregate
stock equivalents in the Account on the Termination Date multiplied by
the last sales price of the Common Shares on the NASDAQ National
Market System or the closing price of such shares on the principal
exchange on which such shares are listed, as the case may be, on the
nearest trading day preceding the Termination Date. No further
interest (in the case of cash allotment) or dividend equivalent (in
the case of stock allotment) shall accrue or be credited to the
Account after the Termination Date.
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<PAGE> 4
IX. DISTRIBUTION
A. Distribution of the Final Account Balance shall be
made in cash in five (5) approximately equal annual
installments, without interest, commencing six (6)
months after the Termination Date. Notwithstanding
the foregoing, at any time after the Termination
Date, the Director may, by written notice to the
Company, elect to receive distribution of the Final
Account Balance in a single lump sum payment, at any
time six (6) months after the Termination Date.
B. In the event the Final Account Balance or any portion
thereof shall be distributable after the Director's
death, the same shall be distributed, as provided in
paragraph A of this Section IX, to such person or
persons, or the survivors thereof, including
corporations, unincorporated associations or trusts,
as the Director may have designated in writing and
delivered to the Secretary of the Company. The
Director may from time to time revoke or change any
such designation by written notice delivered to the
Secretary of the Company. If there is no unrevoked
designation on file with the Company at any time of
the Director's death, such distribution shall be made
to the Director's estate in one lump sum payment to
be made at the later of (i) six (6) months after date
of death or (ii) thirty (30) days of the appointment
of the Executor of the estate.
X. MISCELLANEOUS
A. Neither the Director nor any other person shall have
any interest in any fund or in any specific asset or
assets of the Company by reason of any cash or stock
equivalents credited to the Account of a Director
hereunder, nor the right to exercise any of the
rights or privileges of a shareholder with respect to
any stock equivalents credited to his Account, nor
any right to receive any distribution under this
Agreement except as and to the extent expressly
provided in this Agreement. Any allotment or credit
to the Account shall be reflected as a general asset
on the books of the Company, subject to the claims
and obligations of creditors and others and any
liability created hereunder to the Director shall be
in the nature of a general claim without any priority
or right being created in the Director.
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<PAGE> 5
B. The Director shall not have the right to assign,
pledge or otherwise dispose of (except as provided in
Section IX hereof) any cash or stock equivalents in
the Account, nor shall his interest therein be
subject to garnishment, attachment, transfer by
operation of law, or any legal process. If the
Director should attempt to assign, pledge or
otherwise dispose of (except as provided in Section
IX thereof) any cash and/or stock equivalents in the
Account or if any attempt shall be made to garnish,
attach, transfer by operation of law or by any legal
process his interest in the Account, all cash and
stock equivalents in the Account and all interests of
the Director therein, shall, at the discretion of the
Company, cease and determine, and in such event the
Company may hold or apply same or any part thereof
for the benefit of the Director, the Director's
spouse, children or other dependents, or any of them,
in such manner and in such proportion as the Company
may deem proper.
C. This Agreement shall not be assignable by the Company
without the written consent of the Director, except
that, if the Company shall merge or consolidate with
or into, or transfer substantially all of its assets
including good will to, another organization or other
form of business organization, this Agreement shall
bind and run to the benefit of the successor of the
Company resulting from such merger, consolidation or
transfer.
D. This Agreement comprises the entire agreement between
the parties hereto and supersedes, cancels and annuls
any and all prior agreements between the parties
hereto with respect to payments to the Director for
services to the Company. This Agreement may not be
modified or amended more than once every six (6)
months, other than to compart with changes in the
Internal Revenue Code, ERISA, or the rules
thereunder, which shall be in a writing duly executed
and delivered by the parties hereto.
E. This Agreement may be executed in duplicate and each
counterpart shall be deemed to be an original, and
both of which together shall constitute one and the
same instrument.
F. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
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<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date hereof.
RPM, INC.
By____________________________
Thomas C. Sullivan, Chairman
DIRECTOR
______________________________
6
<PAGE> 1
EXHIBIT 10.10
RPM, INC.
DEFERRED COMPENSATION PLAN
Effective Date: February 3, 1994
<PAGE> 2
THE RPM, INC.
DEFERRED COMPENSATION PLAN
1. STATEMENT OF PURPOSE
The purpose of The RPM, Inc. Deferred Compensation Plan (the
"Plan") is to aid RPM, Inc. (the "Company") in attracting and
retaining key employees by providing a non-qualified
compensation deferral vehicle.
<TABLE>
<CAPTION>
2. DEFINITIONS
<S> <C>
2.1 BENEFICIARY - "Beneficiary" means the person or persons
designated as such in accordance with Section 8.
2.2 CLOSING PRICE - "Closing Price" means the last sales
price per share of the Company's Common Stock on the NASDAQ
exchange as reported in THE WALL STREET JOURNAL, for the
day at issue or the nearest previous trading day if no
trade is reported for the day at issue.
2.3 COMMITTEE - "Committee" means the Compensation Committee
of the Board of Directors of the Company which will
administer the Plan pursuant to the provisions of Section 3
of the Plan.
2.4 COMMON STOCK - "Common Stock" means the authorized Common
Shares (without par value) of the Company.
2.5 COMPENSATION - "Compensation" means the Participant's
base salary and annual cash bonus.
2.6 CYCLE - "Cycle" means the twelve month pay-in period for
each deferral. The initial Cycle shall commence on June 1,
1994 and end on May 31, 1995. A new Cycle shall commence
each June 1 thereafter.
</TABLE>
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2.7 DEFERRAL AMOUNT - "Deferral Amount" means the amount of
Elective Deferred Compensation actually deferred by the
Participant.
2.8 DEFERRED COMPENSATION ACCOUNT - "Deferred Compensation
Account" means the account maintained on the books of
account of the Company for each Participant pursuant to
Section 6.
2.9 DISABILITY - "Disability" means the Participant is
eligible to receive benefits under a long term disability
plan maintained by the Company.
2.10 DISTRIBUTION DATE - "Distribution Date" means the date on
which the Company makes distributions from the
Participant's Deferred Compensation Account.
2.11 DIVIDEND EQUIVALENT CREDIT - "Dividend Equivalent Credit"
means a credit that is equivalent in value to what a
Participant would have received had the Participant owned
an equal number of shares of Company Common Stock as of the
date any cash or stock dividend is payable to holders of
Common Stock.
2.12 ELECTION FORM - "Election Form" means the form or forms
attached to this Plan and filed with the Committee by the
Participant in order to participate in the Plan. The terms
and conditions specified in the Election Form(s) are
incorporated by reference herein and form a part of the
Plan.
2.13 ELECTIVE DEFERRED COMPENSATION - "Elective Deferred
Compensation" means the amount elected to be deferred by an
Eligible Employee in his Election Form, subject to approval
by the Committee.
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2.14 ELIGIBLE EMPLOYEE - "Eligible Employee" means those
employees of the Company who have been selected by the
Committee.
2.15 INSIDER - "Insider" means those employees of the Company
who have been determined by the Board of Directors of the
Company to be an "officer" of the Company within the
meaning of Rule 16a-1(f) under Section 16 of the Securities
and Exchange Act of 1934 or any successor to such rule.
2.16 PARTICIPANT - "Participant" means an Eligible Employee
participating in the Plan in accordance with the provisions
of Section 4.
2.17 PLAN YEAR - "Plan Year" means the twelve month period
beginning on the first day of the first Cycle in which the
Eligible Employee elects to participate in the Plan. The
initial Plan Year shall commence on June 1, 1994 and end on
May 31, 1995.
2.18 PRIME RATE - "Prime Rate" means the Prime Rate as quoted
and published by the National City Corporation, or its
successors, or, if such corporation ceases to exist or does
not publish a prime rate, then the average Prime Rate as
quoted and published by the Wall Street Journal.
2.19 RELATED EMPLOYMENT - "Related Employment" means the
employment of a Participant by an employer which is not the
Company provided (i) such employment is undertaken by the
Participant at the request of the Company; (ii) immediately
prior to undertaking such employment the Participant was an
officer or employee of the Company, or was engaged in
Related Employment as herein defined; and (iii) such
employment is recognized by the Committee, in its sole
discretion, as Related Employment.
2.20 STOCK CREDIT - "Stock Credit" means a credit that is
equivalent to one share of Company Common Stock.
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<PAGE> 5
2.21 SUBSTANTIALLY EQUAL INSTALLMENTS - "Substantially Equal
Installments" means a series of annual payments, such that
equal payments over the remaining payment period would
exactly amortize the Deferred Compensation Account balance
as of the Distribution Date if the credited interest rate
remained constant at the level credited as of the Valuation
Date immediately preceding the Distribution Date for the
remainder of the payment period.
2.22 TERMINATED FOR CAUSE - "Terminated for Cause" means, with
respect to a Participant, the definition give to that term
in any written employment agreement existing between the
Company and the Participant; absent any such agreement, or
absent a definition of the term in the agreement, the term
shall mean the termination of the Participant's employment
with the Company due to: (i) fraud, misappropriation or
intentional material damage to the property or business of
the Company; (ii) commission of a felony; or (iii)
continuance of either willful and repeated failure or
grossly negligent and repeated failure by the Participant
to perform his duties.
2.23 TERMINATION OF EMPLOYMENT - "Termination of Employment"
means the termination of a Participant's employment with
the Company for any reason other than Related Employment,
or the termination of a Participant's Related Employment.
2.24 VALUATION DATE - "Valuation Date" means the date on which
the value of a Participant's Deferred Compensation Account
for each Cycle is determined as provided in Section 6
hereof. Unless and until changed by the Committee, the
Valuation Date for each Cycle shall be the last day of the
Cycle.
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3. ADMINISTRATION OF THE PLAN
The Committee shall be the sole administrator of the Plan and
will administer the Plan. The Committee shall have full power
to formulate additional details and regulations for carrying out
this Plan. The Committee shall also be empowered to make any
and all of the determinations not herein specifically authorized
which may be necessary or desirable for the effective
administration of the Plan. Any decision or interpretation of
any provision of this Plan adopted by the Committee shall be
final and conclusive.
4. PARTICIPATION
4.1 ELECTIVE PARTICIPATION
a. Any Eligible Employee may elect to participate in
the Plan for a given Cycle by filing a completed
Election Form for the Cycle with the Committee.
With regard to an election to participate:
i. The Election Form must be filed with the Committee
prior to the commencement of the Cycle to which
the Election Form pertains. Notwithstanding the
foregoing, an employee who first becomes an
Eligible Employee during any Cycle may elect to
participate in the Plan for such Cycle by filing
an Election Form within thirty (30) days of
becoming an Eligible employee; and
ii. The minimum deferral for a Cycle shall be $1,000.
iii. The maximum deferral for a Cycle shall be the
amount specified by the Committee.
b. A Participant's election to defer future Compensation is
irrevocable upon the filing of his Election Form with the
Committee, provided, however, that the election may be terminated
with respect to Compensation
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<PAGE> 7
not yet earned by mutual agreement in writing between the
Participant and the Committee. Such termination if
approved shall be effective immediately.
5. VESTING OF DEFERRED COMPENSATION ACCOUNT
A Participant's interest in his Deferred Compensation Account
shall be fully vested and non-forfeitable at all times.
6. ACCOUNTS AND VALUATIONS
6.1 DEFERRED COMPENSATION ACCOUNTS. The Committee shall
establish and maintain a separate Deferred Compensation
Account for each Participant for each Cycle. Any Elective
Deferred Compensation shall be credited to the
Participant's Deferred Compensation Account when deferred.
6.2 RATE OF RETURN CREDITED.
a. Except as provided in Sections 6.3 and 6.4, each
Participant's Deferred Compensation Account shall be
credited with interest annually under the Interest Rate
Option or the RPM Stock Account Option, as elected by
the Participant on his completed Election Form for each
cycle.
b. Compensation deferred hereunder and allocated to the
Interest Rate Option shall be credited with interest at
a rate fixed from time to time by the Committee;
provided that such rate shall not be less than the
Prime Rate as of December 1 of the year prior to when
deferrals will occur.
c. Notwithstanding Section 6.2(b), if a reallocation into
an Interest Rate Option Account is made by a
Participant pursuant to Section 6.3, the crediting rate
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<PAGE> 8
shall not be less than the Prime Rate for the December
1 of the year prior to the reallocation election.
d. Compensation deferred hereunder and allocated to the
RPM Stock account Option shall be periodically adjusted
(upward or downward, as the case may be) by the
Committee to reflect the value that such compensation
would have if it were invested in RPM, Inc. Common
Stock and if any dividends payable with respect to the
Common Stock were reinvested in Common Stock.
As of the date any dividend is paid to holders of Common
Stock, the Participant's RPM Stock Account shall also be
credited with a Dividend Equivalent Credit equal to the
number of shares of Common Stock (including fractions of a
share to the nearest ten thousandth) that could have been
purchased at the Closing Price of Common Stock on such date
with the dividend paid on the number of shares of Common
Stock to which the Participant's RPM Stock Account is then
credited. In case of dividends paid in property, the
dividend shall be deemed to be the fair market value of the
property at the date of distribution of the dividend, as
determined by the Committee. The amount of RPM Stock
Credits credited to each Participant's RPM Stock Account
shall be appropriately adjusted upon the occurrence of any
stock split or reverse stock split.
6.3 ALLOCATION OF ACCOUNTS. Each participant shall specify
in writing, on his Election Form, how the amounts the
Participant has deferred hereunder shall be allocated
between the Interest Rate Option and the RPM Stock Account
Option.
The Committee may, in its discretion and from time to time,
but not more frequently than once in any twelve (12) month
period, permit a Participant to elect to reallocate amounts
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<PAGE> 9
from the Interest Rate Option to the RPM Stock Account
Option or from the RPM Stock Account Option to the Interest
Rate Option, subject to such conditions and such
limitations as the Committee may prescribe. Any such
reallocation election shall be in writing and in a form
acceptable to the Committee. Subject to the foregoing, the
Committee may permit a Participant who is an Insider to
elect to reallocate into or out of the RPM Stock Account
pursuant to this Section 6.3 within a quarterly ten (10)
day window period which begins on the third business day
after the release of the Company's quarterly financial
information.
The Committee may require that any reallocation election
under this Section 6.3 apply to the entire amount credited
to a Participant's Interest Rate Option Account or RPM
Stock Account or to such percentage or percentages of that
amount as the Committee may specify (e.g., increments of
25%).
If a Participant fails to specify a rate of return option
with respect to the Participant's Elective Deferred
Compensation, the Participant shall be presumed to have
specified the Interest Rate Option.
6.4 TIMING OF CREDITING OF INTEREST. Each Deferred
Compensation Account of each Participant shall be revalued
and credited with interest and dividend equivalents, as
applicable, as of each Valuation Date. As of each
Valuation Date, the value of each Deferred Compensation
Account shall consist of the balance of such Deferred
Compensation Account as of the immediately preceding
Valuation Date, plus the amount of any Elective Deferred
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Compensation credited to the Participant's Deferred
Compensation Account since the preceding Valuation Date,
minus the amount of all distributions, if any, made from
such Deferred Compensation Account since the preceding
Valuation Date. As of each Valuation Date, interest shall
be credited on the average daily balance of the
Participant's Deferred Compensation Account since the
immediately preceding Valuation Date after adjustment for
any additions thereto (including interest and dividend
equivalents) or distributions therefrom. Benefit
distributions (under Section 7) made on or before February
15 of the year of payment will be considered to have been
made from the account and deducted from the account balance
as of January 1 of such year for the purpose of crediting
interest under this Section 6.4.
7. BENEFITS
7.1 NORMAL BENEFIT
a. A Participant's Deferred Compensation Account shall be
paid to the Participant in accordance with the terms of
the Participant's Election Form, subject to the terms
and conditions specified in the Election Form. If a
Participant elects to receive payment of his Deferred
Compensation Account in installments, payments shall be
made in Substantially Equal Installments. Unless the
Committee determines otherwise, and subject to the
provisions of Section 7.6 as to when payments shall
commence, installments shall be paid on the first day
of February of each year.
b. Distribution of a Participant's RPM Stock Account
balance shall be made in cash with the amount of the
distribution determined by multiplying the number of
Stock Credits attributable to the installment by the
Closing Price of Common Stock on the last business day
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in December immediately prior to the Plan Year in which
the installment is to be paid; provided, however, that
if an alternative distribution date is determined by
the Committee pursuant to Section 7.6 or if
distribution is payable pursuant to Section 7.1(c) or
Section 7.1(d), the Closing Price to be used shall be
the Closing Price of Common Stock on the last business
day immediately prior to the date of Participant's
termination of employment.
c. Notwithstanding the provisions of Section 7.1a, and
notwithstanding any contrary election made by the
Participant on his Election Form, if a Participant
terminates his employment for any reason other than
death or Disability, the Participant's Deferred
Compensation Account balance will be paid to the
Participant in a lump sum within ninety (90) days
following the Participant's Termination of Employment.
However, upon the written request of the Participant,
the Committee, in its sole discretion, may allow
payments to be made to the Participant in up to five
(5) annual installments.
d. If a Participant dies before receiving his or her total
account balance for a Cycle, his Beneficiary shall be
entitled to the remaining account balance. The
Participant may specify that any amounts payable to any
Beneficiary under this provision shall be paid either
in a lump sum within ninety (90) days after the
Participant's death, or in up to ten equal annual
installments beginning in the February after the
Participant's death. If the Participant has not
designated a Beneficiary, or if the Participant fails
to specify the manner of payment to his Beneficiary,
the Participant's Deferred Compensation Account value
will be paid to the Participant's estate, in a lump
sum, within ninety (90) days after the Participant's
death.
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7.2 HARDSHIP BENEFIT. In the event that the Committee, upon
written petition of the Participant, determines in its sole
discretion, that the Participant has suffered an
unforeseeable financial emergency, the Company may pay to
the Participant, as soon as practicable following such
determination, an amount necessary to meet the emergency,
not in excess of the Deferred Compensation Account credited
to the Participant. The Deferred Compensation Account of
the Participant shall thereafter be reduced to reflect the
payment of a Hardship Benefit.
7.3 TERMINATED FOR CAUSE. Notwithstanding any contrary
provisions of this Section 7, if a Participant's employment
with the Company is Terminated for Cause, the Participant's
Deferred Compensation Account balance will be paid to the
Participant in a lump sum within ninety (90) days following
the Participant's Termination of Employment.
7.4 REQUEST TO COMMITTEE FOR DELAY IN PAYMENT. A Participant
shall have no right to modify in any way the schedule for
the distribution of amounts from his Deferred Compensation
Account which he has specified in his Election Form.
However, upon a written request submitted by the
Participant to the Committee, the Committee may, in its
sole discretion:
a. Postpone one time the date on which payment shall
commence; and
b. Increase one time the number of installments to a
number not to exceed ten (10).
Any such request(s) must be made at least ninety (90) days
prior to the earlier of (1) the beginning of the year which
the Participant has elected for distributions to commence,
or (2) the Participant's Termination of Employment.
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7.5 TAXES; WITHHOLDING. To the extent required by law, the
Company shall withhold from payments made hereunder an
amount equal to at least the minimum taxes required to be
withheld by the federal or any state or local government.
7.6 DATE OF PAYMENTS. Except as otherwise provided in this
Plan, payments under this Plan shall begin on or before the
fifteenth (l5th) day of July of the calendar year following
receipt of notice by the Committee of an event which
entitles a Participant (or Beneficiary) to payments under
the Plan, or at such earlier date as may be determined by
the Committee.
8. BENEFICIARY DESIGNATION
A Participant shall have the right at any time, and from time to
time, to designate and/or change or cancel any person, persons,
or entity as his Beneficiary or Beneficiaries (both principal
and contingent) to whom payment under this Plan shall be paid in
the event of his death prior to complete distribution to
Participant of the benefits due him under the Plan. Each
beneficiary designation shall become effective only when filed
in writing with the Committee during the Participant's lifetime
on a form provided by the Committee. The filing of a new
beneficiary designation form will cancel all beneficiary
designations previously filed.
Any finalized divorce of a Participant subsequent to the date of
filing of a beneficiary designation form in favor of the
Participant's spouse shall revoke such designation. The spouse
of a married Participant domiciled in a community property
jurisdiction shall join in any designation of Beneficiary or
Beneficiaries other than the spouse.
If a Participant fails to designate a Beneficiary as provided
above, or if his beneficiary designation is revoked by divorce,
or otherwise, without execution of a new designation, or if all
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designated Beneficiaries predecease the Participant or die prior
to complete distribution of the Participant's benefits, then the
distribution of such benefits shall be made to the Participant's
estate.
If any distribution to a Beneficiary is to be made in
installments, and the primary Beneficiary dies before receiving
all installments, the remaining installments, if any, shall be
paid to the estate of the primary Beneficiary.
9. AMENDMENT AND TERMINATION OF PLAN
9.1 AMENDMENT. The Board of Directors may at any time amend
the Plan in whole or in part, provided, however, that
except as provided in 9.2, no amendment shall be effective
to decrease the benefits under the Plan payable to any
Participant or Beneficiary with respect to any Elective
Deferred Compensation deferred prior to the date of the
amendment. Written notice of any amendments shall be given
to each individual then participating in the Plan.
9.2 TERMINATION OF PLAN
a. COMPANY'S RIGHT TO TERMINATE. The Board of Directors
of the Company may at any time terminate the Plan, in
its sole discretion for any reason whatsoever.
b. PAYMENTS UPON TERMINATION. Upon any termination of
the Plan under this section, Compensation shall
prospectively cease to be deferred and, with respect to
Compensation previously deferred, the Company will pay
to the Participant, in a lump sum, the value of his
Deferred Compensation Account.
10. MISCELLANEOUS
10.1 UNSECURED GENERAL CREDITOR. Participants and their
beneficiaries, heirs, successors and assignees shall have
no legal or equitable rights, interests, or other claims in
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any property or assets of the Company, nor shall they be
beneficiaries of, or have any rights, claims, or interests
in any life insurance policies, annuity contracts, or the
policies therefrom owned or which may be acquired by
Company ("policies"). Such policies or other assets of the
Company shall not be held under any trust for the benefit
of Participants, their beneficiaries, heirs, successors, or
assigns, or held in any way as collateral security for the
fulfilling of the obligations of the Company under this
Plan. Any and all of the Company's assets and policies
shall be and remain general, unpledged, unrestricted assets
of the Company. The Company's obligation under the Plan
shall be that of an unfunded and unsecured promise of the
Company to pay money in the future.
10.2 SUCCESSORS AND MERGERS, CONSOLIDATIONS OR CHANGE IN
CONTROL. The terms and conditions of this Plan shall
inure to the benefit of and bind the Company, the
Participants, their successors, assignees, and personal
representatives. If substantially all of the stock or
assets of the Company are acquired by another corporation
or entity or if the Company is merged into, or consolidated
with, another corporation or entity, then the obligations
created hereunder shall be obligations of the acquiror or
successor corporation or entity.
10.3 NON-ASSIGNABILITY. Neither a Participant nor any other
person shall have any right to commute, sell, assign,
transfer, pledge, anticipate, mortgage, or otherwise
encumber, transfer, hypothecate, or convey in advance of
actual receipt the amounts, if any, payable hereunder, or
any part thereof, which are, and all rights to which are,
expressly declared to be unassignable and nontransferable.
No part of the amounts payable shall, prior to actual
payment, be subject to seizure or sequestration for the
Page 14
<PAGE> 16
payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor
be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or
insolvency.
10.4 EMPLOYMENT OR FUTURE ELIGIBILITY TO PARTICIPATE NOT
GUARANTEED. Nothing contained in this Plan nor any action
taken hereunder shall be construed as a contract of
employment or as giving any Eligible Employee any right to
be retained in the employ of the Company. Designation as
an Eligible Employee may be revoked at anytime by the
Committee with respect to any Compensation not yet
deferred.
10.5 GENDER, SINGULAR AND PLURAL. All pronouns and any
variations thereof shall be deemed to refer to the
masculine, feminine, or neuter, as the identity of the
person or persons may require. As the context may require,
the singular may be read as the plural and the plural as
the singular.
10.6 CAPTIONS. The captions to the articles, sections, and
paragraphs of this Plan are for convenience only and shall
not control or affect the meaning or construction of any of
its provisions.
10.7 APPLICABLE LAW. This Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
10.8 VALIDITY. In the event any provision of this Plan is
held invalid, void, or unenforceable, the same shall not
affect, in any respect whatsoever, the validity of any
other provision of this Plan.
Page 15
<PAGE> 17
10.9 NOTICE. Any notice or filing required or permitted to be
given to the Committee shall be sufficient if in writing
and hand delivered, or sent by registered or certified
mail, to the principal office of the Company at 2628 Pearl
Road, Medina, OH 44258, directed to the attention of the
Chief Executive Officer. Such notice shall be deemed given
as of the date of delivery or, if delivery is made by mail,
as of the date shown on the postmark on the receipt for
registration or certification. Any notice to the
Participant shall be addressed to the Participant at the
Participant's residence address as maintained in the
Company's records. Any party may change the address for
such party here set forth by giving notice of such change
to the other parties pursuant to this Section.
11. CLAIMS PROCEDURE
11.1 NAMED FIDUCIARY. The Committee is hereby designated as
the named fiduciary under this Plan. The named fiduciary
shall have authority to control and manage the operation
and administration of the Plan.
11.2 CLAIMS PROCEDURE. Any controversy or claim arising out
of or relating to this Plan shall be filed with the
Committee which shall make all determinations concerning
such claim. Any decision by the Committee denying such
claim shall be in writing and shall be delivered to all
parties in interest in accordance with the notice
provisions of Section 10.9 hereof. Such decision shall set
forth the reasons for denial in plain language. Pertinent
provisions of the Plan shall be cited and, where
appropriate, an explanation as to how the Participant can
perfect the claim will be provided. This notice of denial
of benefits will be provided within 90 days of the
Committee's receipt of the Participant's claim for
benefits. If the Committee fails to notify the Participant
Page 16
<PAGE> 18
of its decision regarding the claim, the claim shall be
considered denied, and the Participant shall then be
permitted to proceed with the appeal as provided in this
Section.
A Participant who has been completely or partially denied a
benefit shall be entitled to appeal this denial of his
claim by filing a written statement of his position with
the Committee no later than sixty (60) days after receipt
of the written notification of such claim denial. The
Committee shall schedule an opportunity for a full and fair
review of the issue within thirty (30) days of receipt of
the appeal. The decision on review shall set forth
specific reasons for the decision, and shall cite specific
references to the pertinent Plan provisions on which the
decision is based.
Following the review of any additional information
submitted by the Participant, either through the hearing
process or otherwise, the Committee shall render a
decisions on the review of the denied claim in the
following manner:
a. The Committee shall make its decision regarding the
merits of the denied claim within 60 days following
receipt of the request for review (or within 120 days
after such receipt, in a case where there are special
circumstances requiring extension of time for reviewing
the appealed claim). The Committee shall deliver the
decision to the claimant in writing. If an extension
of time for reviewing the appealed claim is required
because of special circumstances, written notice of the
extension shall be furnished to the Participant prior
to the commencement of the extension. If the decision
on review is not furnished within the prescribed time,
the claim shall be deemed denied on review.
Page 17
<PAGE> 19
b. The decision on review shall set forth specific reasons
for the decision, and shall cite specific references to
the pertinent Plan provisions on which the decision is
based.
IN WITNESS WHEREOF, RPM, INC., by its Chairman of the Board duly
authorized, has caused this Plan to be signed this 3rd day of
February, 1994.
RPM, INC.
By: /S/ Thomas C. Sullivan
------------------------------------
Thomas C. Sullivan, Chairman
Page 18
<PAGE> 1
<TABLE>
EXHIBIT 11.1
RPM, INC. AND SUBSIDIARIES
--------------------------
CONSOLIDATED STATEMENTS OF COMPUTATIONS OF EARNINGS
---------------------------------------------------
PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
---------------------------------------------
(In thousands except per share amounts)
<CAPTION>
Year Ended May 31
-------------------------------------
1994 1993 1992
--------- ------------ ------------
(Restated) (Restated)
<S> <C> <C> <C>
NET INCOME
- - ---------
Net income applicable to common shares
for primary earnings per share $52,640 $39,498 $38,481
Add back interest net of tax on con-
vertible securities assumed to be
converted 4,850 5,024 2,025
--------- --------- ---------
Net income applicable to common shares
for fully-diluted earnings per share $57,490 $ 44,522 $ 40,506
========= ========= =========
SHARES OUTSTANDING
- - ------------------
For computation of primary earnings per
common share
Weighted average shares 56,379 52,925 52,453
Net issuable common share equivalents 338 342 337
---------- --------- ---------
Total shares for primary earnings
per share 56,717 53,267 52,790
For computation of fully-diluted earnings
per common share
Additional shares of issuable common
share equivalents assuming conversion
of convertible securities 8,149 8,885 3,676
Additional common share equivalents
ending market value higher than
average market value 10 62 40
--------- ----------- ------------
Total shares for fully-diluted
earnings per share 64,876 62,214 56,506
========== =========== ===========
EARNINGS PER COMMON SHARE AND COMMON SHARE
- - ------------------------------------------
EQUIVALENTS $.93 $.74 $.73
----------- ====== ===== =====
EARNINGS PER COMMON SHARE ASSUMING FULL
- - ---------------------------------------
DILUTION $.89 $.72 $.72
-------- ====== ===== =====
</TABLE>
Data for May 31, 1993 and 1992, has been restated to include two acquisitions
during the year ended May 31, 1994, which were accounted for as poolings of
interests.
<PAGE> 1
EXHIBIT 21.1
--------------
RPM, INC.
---------
The following is a list of the direct and indirect operating subsidiaries of
RPM, Inc. as of May 31, 1994:
<TABLE>
<CAPTION>
Percentage of
Jurisdiction of Securities Owned
Name Incorporation By RPM, Inc. (1)(2)(3)
---- ------------- ----------------------
<S> <C> <C>
Bondex International, Inc. Ohio 100%
Consolidated Coatings Ohio 100%
Corporation
Day-Glo Color Corp. Ohio 100%
Kop-Coat, Inc. Ohio 100% (4)
Mameco International, Inc. Ohio 100% (5)
Republic Powdered Metals, Inc. Ohio 100% (6)
RPM of North Carolina, Inc. Ohio 100% (6)
RPM World Travel, Inc. Ohio 100%
Talsol Corp. Ohio 100%
Euchem, Inc. Ohio 100% (7)
The Testor Corporation Ohio 100%
Westgate Advertising, Inc. Ohio 100%
Label Systems Corporation Connecticut 100%
BSP Systems, Inc. Delaware 100% (6)
Carboline Company Delaware 100% (8)
Carboline International Delaware 100% (8)
Corporation
RPM World Trade, Inc. Delaware 100% (9)
Stonhard, Inc. Delaware 100% (10)
Wisconsin Protective Coatings Delaware 100% (11)
Corp.
PCI Industries, Inc. Florida 100% (12)
American Emulsions Co., Inc. Georgia 100% (13)
Dynatron/Bondo Corporation Georgia 100% (14)
Lubraspin Corporation Georgia 100% (13)
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Percentage of
Jurisdiction of Securities Owned
Name Incorporation By RPM, Inc. (1)(2)(3)
---- ------------- ----------------------
<S> <C> <C>
Select Dye & Chemical, Inc. Georgia 100% (13)
Bradshaw-Praeger & Co., Inc. Illinois 100% (12)
Design/Craft Fabric Corporation Illinois 100%
RPM of Illinois, Inc. Illinois 100% (17)
Chemical Specialties Maryland 100%
Manufacturing Corporation
RPM of Mass, Inc. Massachusetts 100% (15)
Haartz-Mason, Inc. Massachusetts 100% (15)
Mantrose-Haeuser Co., Inc. Massachusetts 100% (12)
Westfield Coatings Massachusetts 100% (15)
Corporation
Craft House Corporation Michigan 100%
Carboline World-Wide Missouri 100% (8)
Corporation
William Zinsser and Co., New Jersey 100% (12)
Incorporated
Alox Corporation New York 100% (4)
Floquil-Polly S Color Corp. New York 100%
Mohawk Finishing Products, New York 100%
Inc.
Richard E. Thibaut, Inc. New York 100% (12)
Chemical Coatings, Inc. North Carolina 100%
Paramount Technical Products, South Dakota 100% (5)
Inc.
Briner Paint Mfg. Co. Texas 100% (11)
Sentry Polymers, Inc. Texas 100%
First Colonial Insurance Vermont 100%
Company
Bondex International Canada 100%
(Canada) Ltd.
Bondo Canada Limited Canada 100% (14)
Stonhard Canada Limited Canada 100% (10)
</TABLE>
-2-
<PAGE> 3
<TABLE>
<CAPTION>
Percentage of
Jurisdiction of Securities Owned
Name Incorporation By RPM, Inc. (1)(2)(3)
---- ------------- ----------------------
<S> <C> <C>
RPM/Belgium N.V. Belgium 100% (8)
Radiant Color N.V. Belgium 100% (16)
Martin Mathys N.V. Belgium 100% (16)
RPM/France S.A. France 100%
Stonhard France SARL France 100% (10)
Stonhard GmbH Germany 100% (10)
Stonhard Latin America Mexico 100% (10)
RPM/Europe B.V. Netherlands 100% (16)
RPM/Netherlands B.V. Netherlands 100%
RPM/Luxembourg S.A. Luxembourg 100% (8)
<FN>
_____________________________________________
(1) The ownership of Directors' qualifying shares by persons other than
RPM, Inc. is not reflected in the stated percentage ownership.
(2) Included in the Company's consolidated financial statements.
(3) In addition, RPM, Inc. owns 100% of the outstanding shares of
Cal-O-Cam, Inc., a Michigan corporation, FOPECO, Inc., a New York
corporation, and RPM Finance N.V., a Netherlands Antilles corporation,
all of which are non-operating subsidiaries. The outstanding shares
of Alox International Sales Corp., a New York corporation which is a
non-operating subsidiary, are owned by Alox Corporation, a wholly
owned subsidiary of Kop-Coat, Inc., a wholly owned subsidiary of RPM,
Inc.
(4) Kop-Coat, Inc. owns 100% of the outstanding shares of Alox
Corporation, a New York corporation.
(5) Mameco International, Inc. owns 100% of the outstanding shares of
Paramount Technical Products, Inc., a South Dakota corporation.
(6) Republic Powdered Metals, Inc. owns 100% of the outstanding shares of
BSP Systems, Inc., a Delaware corporation. BSP Systems, Inc. and RPM
of North Carolina, Inc. each own 50% of AGR Company, an Ohio general
partnership.
(7) Euchem, Inc. owns 50% of The Euclid Chemical Company, an Ohio General
Partnership.
(8) Carboline Company owns 100% of the outstanding shares of Carboline
World-Wide Corporation and Carboline International Corporation.
Through Carboline International Corporation,
</TABLE>
-3-
<PAGE> 4
Carboline owns 100% of Carboline Dubai Corporation, a Missouri
corporation, and 100% of Carboline Marine, Ltd., a Delaware
corporation. Carboline International Corporation also owns less than
50% interests in corporations in Korea, Norway, Japan, India, and
Australia. Carboline International Corporation owns 12% of
RPM/Luxembourg S.A. and 4% of RPM/Belgium N.V., and the Company
directly owns the remaining 88% of RPM/Luxembourg S.A. and 96% of
RPM/Belgium N.V.
(9) DISC Corporation.
(10) Stonhard, Inc. owns 100% of the outstanding shares of Stonhard Canada
Limited, a Canadian federal corporation, Stonhard France SARL, a
France corporation, Stonhard GmbH, a Germany corporation, and Stonhard
Latin America, a Mexico corporation.
(11) Wisconsin Protective Coatings, Corp. owns 100% of the outstanding
shares of Briner Paint Mfg. Co., a Texas corporation.
(12) William Zinsser and Co., Incorporated owns 100% of the outstanding
shares of Bradshaw-Praeger & Co., Inc., an Illinois corporation,
Richard E. Thibaut, Inc., a New York corporation, PCI Industries,
Inc., a Florida corporation, and Mantrose-Haeuser Co., Inc., a
Massachusetts corporation.
(13) American Emulsions Co., Inc. owns 100% of the outstanding shares of
each of the following Georgia corporations: Lubraspin Corporation and
Select Dye & Chemical, Inc.
(14) Dynatron/Bondo Corporation owns 100% of the outstanding shares of
Bondo Canada Limited, an Ontario corporation.
(15) RPM of Mass, Inc. owns 100% of the outstanding shares of the following
Massachusetts corporations: Haartz-Mason, Inc. and Westfield Coatings
Corporation.
(16) RPM, Inc. owns 100% of RPM/Europe B.V., a Netherlands holding company.
Radiant Color N.V. is a Belgium operating company, of which RPM/Europe
B.V. owns 1,249 shares and RPM, Inc. owns 4 shares. Radiant Color
N.V. owns all of the outstanding shares of Martin Mathys N.V., a
Belgium corporation.
(17) Will be merged with and into Rust-Oleum Corporation, an Illinois
corporation, pursuant to which Rust-Oleum Corporation (as the
surviving corporation) will be acquired by RPM, Inc.
373/06821RPG.403
-4-
<PAGE> 1
EXHIBIT 23.1
-------------
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated July 8, 1994 in this Annual Report on Form 10-K
for the year ended May 31, 1994, in RPM, Inc.'s Registration Statements on Form
S-3 (Reg. No. 33-53566, Sentry Polymers, Inc. acquisition, 33-50868, Liquid
Yield Option Notes, 33-68222, Dynatron/Bondo acquisition, and 33-52235,
Stonhard, Inc. acquisition) and Registration Statements on Form S-8 (Reg.
No. 2-65508, 1979 Stock Option Plan, 33-32794, 1989 Stock Option Plan, and
33-54720, Retirement Savings Plan).
CIULLA STEPHENS & CO.
Cleveland, Ohio
August 25, 1994
373/06821CWA.949
<PAGE> 1
EXHIBIT 99.3
RPM, INC. AND SUBSIDIARIES 11
--------------------------
PART II - OTHER INFORMATION
---------------------------
ITEM 1 -- LEGAL PROCEEDINGS
- - ---------------------------
With the addition of six newly filed asbestos-related bodily injury
lawsuits filed against Bondex International, Inc., a wholly-owned subsidiary of
the Company ("Bondex"), there are currently pending against Bondex a total of
300 asbestos-related bodily injury suits filed on behalf of various individuals
in various jurisdictions in the United States. All of these lawsuits name
numerous other corporate defendants and all allege bodily injury as a result of
the exposure to or use of asbestos-containing products. Bondex has denied
liability in all pending lawsuits and continues to vigorously defend them.
As previously reported in the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1993, the Company has been notified by the U.S.
Environmental Protection Agency ("EPA") that it may have liability as a
potentially responsible party ("PRP") under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended ("CERCLA"), in connection
with the Springfield Township Dump Site, Davisburg, Michigan (the "Springfield
Site"). The Company is alleged to be associated with the Springfield Site as
well as the Rose Township Site, Rose Township, Michigan (the "Rose Township
Site") as a consequence of the disposal of waste originating at Mac-O-Lac
Paints, Inc., a former subsidiary of the Company whose assets were sold in
February, 1982. The EPA issued a Record of Decision ("ROD") setting forth the
preferred remedial action for the Springfield Site which includes removal of
volatile organic compond contaminants from soils and groundwater as well as
removal of PCB contaminated soils. The Company and other PRPs have organized a
steering committee which has engaged in negotiations with the EPA with respect
to a proposed Interim Remedial Action Phase involving removal of volatile
organic contaminants from soils and groundwater and reimbursement of the EPA
for past response costs. The committee has strongly disputed the ROD's
requirement for PCB removal and this issue is being reevaluated by the EPA.
The Company and other PRPs have entered into a Consent Order to perform a
portion of the remedial design work for a cleanup and to reimburse the EPA for
a portion of costs the EPA incurred at the site. The Steering Committee is
presently negotiating with EPA regarding the performance of a groundwater
cleanup response action. The EPA is expected to issue a Section 106
Administrative Order to the Company and eleven other parties requiring the
performance of the groundwater cleanup in accordance with the negotiated work
plan. The remaining settlement issues are still under discussion with the EPA.
The Company is pursuing the issue of coverage for this matter with its
insurance carriers. The Company believes that the ultimate resolution of this
matter will not materially affect the Company's finincial position or results
of operations.
<PAGE> 2
12
RPM, INC. AND SUBSIDIARIES
--------------------------
PART II - OTHER INFORMATION
---------------------------
ITEM 1. -- LEGAL PROCEEDINGS - Continued
- - ------------------------------
Carboline Company, a wholly-owned subsidiary of the Company
("Carboline") has been named by the EPA together with 36 other entities
as a PRP under CERCLA in connection with the Powell Road Landfill Site, Huber
Heights, Ohio (the "Site"). Carboline is alleged to be associated with the
Site as a consequence of disposal of waste originating at its Xenia, Ohio
plant. Carboline has joined with other PRPs in a "PRP Organization Agreement"
for the purpose of conducting a common response to any claim for removal or
response action asserted by the EPA or the State of Ohio or conducting a common
defense to any such claim. A remedial investigation ("RI") to evaluate the
nature and extent of contamination at the Site and a feasibility study ("FS")
of recommended cleanup remedy, prepared by Waste Management, Inc., owner of the
Site, have been submitted to the EPA. Following its review of the RI/FS, the
EPA has tentatively proposed a more expensive remedy, which will be the subject
of future negotiations. The Company believes that the ultimate resolution of
this matter will not materially affect the Company's financial position or
results of operations.
<PAGE> 3
11
RPM, INC. AND SUBSIDIARIES
--------------------------
PART II - OTHER INFORMATION
---------------------------
ITEM 1 -- LEGAL PROCEEDINGS
- - ---------------------------
Two asbestos-related bodily injury lawsuits which had previously been
filed against Bondex International, Inc., a wholly-owned subsidiary of the
Company ("Bondex") were dismissed with prejudice as a result of plaintiffs'
inability to produce evidence of exposure to or use of any Bondex
asbestos-containing product. Further, thirty additional lawsuits which had been
filed in IN RE: ASBESTOS PRODUCTS LIABILITY LITIGATION (NO. VI); U.S. District
Court, Eastern District of Pennsylvania, Civil Action No. MDL 875, were
dismissed without prejudice by Order entered October 15, 1993. All involved
allegations of asbestos-related diseases not compensable under current
Pennsylvania case law. All of the dismissed cases are subject to reinstatement
should the diseases alleged by plaintiffs progress to a compensable status.
There are currently pending against Bondex a total of 284 asbestos-related
bodily injury suits filed on behalf of various individuals in various
jurisdictions in the United States. All of these lawsuits name numerous other
corporate defendants and all allege bodily injury as a result of the exposure
to or use of asbestos-containing products. Bondex has denied liability in all
pending lawsuits and continues to vigorously defend them.
As previously reported in the Company's Quarterly Report on Form 10-Q
for the quarter ended August 31, 1993, Carboline Company, a wholly-owned
subsidiary of the Company ("Carboline") has been named by the U.S.
Environmental Protection Agency ("EPA") together with 36 other entities as a
potentially responsible party ("PRP") under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended ("CERLCA") in connection
with the Powell Road Landfill Site, Huber Heights, Ohio (the "Site"). Carboline
is alleged to be associated with the Site as a consequence of disposal of waste
originating at its Xenia, Ohio plant. Carboline has joined with other PRPs in
a "PRP Organization Agreement" for the purpose of conducting a common response
to any claim for removal or response action asserted by the EPA or the State of
Ohio or conducting a common defense to any such claim. A remedial investigation
("RI") to evaluate the nature and extent of contamination at the Site and a
feasibility study ("FS") of recommended cleanup remedy, prepared by Waste
Management, Inc., owner of the Site, have been submitted to the EPA. Following
its review of the RI/FS, the EPA has tentatively proposed a more expensive
remedy, which will be the subject of future negotiations. The PRP group, now
totalling 45, has advised the EPA of the PRPs' interest in negotiating an
Administrative Order on Consent which would obligate the PRPs to perform a
Remedial Design at the Site. Initial discussions with the EPA are scheduled for
January, 1994. Based upon Carboline's estimated allocated share of total waste
volume at the Site (approximately 0.50 percent) the Company believes that
ultimate resolution of this matter will not have a material adverse effect on
the Company's financial position or results of operations.
<PAGE> 4
12
RPM, INC. AND SUBSIDIARIES
--------------------------
PART II - OTHER INFORMATION
---------------------------
ITEM 1 -- LEGAL PROCEEDINGS - Continued
- - ---------------------------
As previously reported in the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1993, agreement was reached to settle two
adversary proceedings pending against the Company in the bankruptcy proceedings
of GEC Industries, Inc. (formerly Gates Engineering Company), a former
subsidiary of the Company ("GEC"), Case No. 89-44 in the United States
Bankruptcy Court for the District of Delaware. The first proceeding, GEC AND
THE WARRANTY CLAIMANTS COMMITTEE V. AMERICAN INTERNATIONAL GROUP, INC., ET AL.,
Adversary No. 90-64, is a declaratory judgment action against the Company,
certain of its subsidiaries and certain of their primary and excess insurers
seeking judicial determination of, among other things, the obligations of the
insurance carriers and scope of coverage under the insuring agreements with
respect to claims asserted against GEC for alleged defective roofing materials
manufactured by GEC. The second proceeding, GEC AND THE WARRANTY CLAIMANTS
COMMITTEE V. RPM, INC., Adversary No. 90-65, seeks to hold the Company liable
for all warranty claims of GEC, based upon allegations that GEC was the alter
ego, instrumentality and actual or apparent agent of the Company. The
settlement agreement, which involves an aggregate payment of $3 million by the
Company and the insurance carriers, was approved by the U.S. Bankruptcy Court
by Order entered May 14, 1993. On May 20, 1993, Notice of Appeal from the Order
was filed in the U.S. District Court for the District of Delaware; Civil Action
No. 93-338 (Bankruptcy No. 89-44), by Jack E. Brown, Trustee in Bankruptcy for
Gentges Roofing and Sheet Metal, Inc., a GEC warranty claimant. Appellant Jack
E. Brown subsequently withdrew the appeal which was then dismissed by the U.S.
District Court per Order entered September 30, 1993. Stipulations of Dismissal
of both adversary proceedings (Adversary Nos. 90-64 and 90-65) were
subsequently executed by all parties and filed with the U.S. Bankruptcy Court.
Per Order entered January 11, 1994, both adversary proceedings were dismissed
with prejudice by the U.S. Bankruptcy Court. This litigation is now ended.
As previously reported in the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1993, the Company was named a defendant in a
lawsuit captioned GATES ENGINEERING COMPANY, INC., ET AL. V. NOMA INDUSTRIES,
LTD., JACK E. BROWN, TRUSTEE IN BANKRUPTCY FOR GENTGES ROOFING & SHEET METAL,
INC. V. GATES ENGINEERING COMPANY, INC., ET AL. (including RPM, Inc.) filed
August 26, 1987 in the United States District Court for the Western District of
Missouri, Central Division, Case No. 86-4053-CV-C-5. In a Third Amended
Complaint, Plaintiff Brown included derivative claims against the Company,
claims for tortious interference with contract and violation by the Company of
the federal RICO statute. The Third Amended Complaint sought $1,394,561.44 in
actual damages, $10 million in punitive damages, treble compensatory damages
under RICO and further relief. Per Order entered May 26, 1993, the U.S.
District Court granted the Company's Motions for
<PAGE> 5
13
RPM, INC. AND SUBSIDIARIES
--------------------------
PART II - OTHER INFORMATION
---------------------------
ITEM 1 -- LEGAL PROCEEDINGS - Continued
- - ---------------------------
Summary Judgment and dismissed all counts alleging civil conspiracy and
violation of the RICO statute. At the commencement of trial on June 7, 1993,
all alter-ego claims against the Company, including counts of fraud, negligence
and breach of contract, were voluntarily dismissed with prejudice by the
plaintiff. On June 9, 1993, the U.S. District Court directed a verdict in favor
of the Company on the sole remaining count of tortious interference with
contract, and judgment was entered per Order entered June 11, 1993. On July 9,
1993, a Notice of Appeal from the Order entered May 26, 1993 (granting the
Company's Motion for Summary Judgment), as well as from the Order entered June
11, 1993 (entering judgment on the directed verdict for the Company), was filed
by plaintiff Brown in the U.S. Court of Appeals, Eighth Circuit; Appeal No.
93.2810. In November, 1993, the Company and plaintiff Brown entered into a
settlement agreement, (subject to approval of the U.S. Bankruptcy Court for the
Western District of Missouri, Central Division), pursuant to which the Company
agreed to pay Brown an amount the Company considers insignificant in exchange
for Brown's complete dismissal of his appeal pending before the U.S. Eighth
Circuit Court of Appeals. On December 27, 1993, the Bankruptcy Court in the
GENTGES bankruptcy proceedings entered an Order approving the settlement;
however, on December 28, 1993 John D. Gentges, a creditor in the GENTGES
bankruptcy proceedings, filed a Notice of Appeal to the U.S. District Court
from the Order of the Bankruptcy Court. The Company and plaintiff Brown
subsequently filed a Stipulation of Dismissal With Prejudice of plaintiff
Brown's appeal pending before the U.S. Eighth Circuit Court of Appeals. Per
Order entered January 7, 1994, the stipulation was granted and plaintiff
Brown's appeal was dismissed with prejudice. Consequently, the GENTGES appeal
to the U.S. District Court is now moot and this litigation is ended.
<PAGE> 6
12
RPM, INC. AND SUBSIDIARIES
--------------------------
PART II - OTHER INFORMATION
---------------------------
purpose of conducting a common response to any claim for removal or response
action asserted by the EPA or the State of Ohio or conducting a common defense
to any such claim. Between 1987 and 1991, the owner of the Site, Waste
Management, Inc., conducted a remedial investigation ("RI") and feasibility
study ("FS") and, in 1991, submitted the RI/FS to EPA. EPA approved the RI in
March, 1992 and approved the FS in March, 1993. Based on the RI/FS, EPA issued
its Record of Decision in September, 1993, in which it selected the remedy for
the cleanup of the Site. The remedy is estimated to cost $20.5 million and
take six years to implement. Some of the PRPs, including Carboline, have
entered into negotiations with EPA concerning the terms of an Administrative
Order on Consent under which the PRPs would prepare the Remedial Design for the
selected remedy at the Site. These negotiations are proceeding. Based upon
Carboline's estimated allocated share of total waste volume at the Site
(approximately 0.50 percent) the Company believes that ultimate resolution of
this matter will not have a material adverse effect on the Company's financial
position or results of operations.
In September, 1991, a Petition captioned OUR LADY OF THE LAKE
HOSPITAL, INC. VS. CARBOLINE COMPANY, ET AL.; No. 373,498, Division "J",
Nineteenth Judicial District Court, Parish of East Baton Rouge, Louisiana, was
filed by plaintiff Our Lady of the Lake Hospital, Inc. ("OLOL") against
Carboline alleging damages to the structural steel of the hospital it owns and
operates in Baton Rouge, Louisiana. The Petition alleged that the damages
result from its use of a fireproofing product known as Pyrocrete manufactured
and supplied by Carboline and that Pyrocrete is extremely corrosive when
applied to structural steel, contains a latent defect, and is defective. The
Petition further alleged that Carboline knew of the defects in Pyrocrete and
intentionally withheld, concealed, and suppressed this information from OLOL.
In October, 1991, OLOL filed a First Amending and Supplemental Petition joining
as party defendants Henningson, Durham & Richardson, Inc. ("HDR") (the original
architects), Southern Builders, Inc. ("SBI") (the original general contractor)
and The Bolton Company ("Bolton") (the original fireproofing subcontractor).
In July, 1992, OLOL dismissed without prejudice HDR and Bolton, and SBI is out
of business. Carboline contested liability in the case vigorously, and on July
21, 1992, the trial court signed Judgment sustaining an Exception of
Prescription filed on Carboline's behalf and dismissed the suit with prejudice.
OLOL appealed the dismissal and also filed in the appellate court a Motion to
Remand seeking to have the matter remanded to the trial court on the basis that
the July 21, 1992 judgment was allegedly obtained through fraud and
concealment. On December 29, 1993, the appellate court vacated the July 21,
1992 judgment and remanded to the trial court for the introduction of further
evidence and further proceedings. Carboline's Application for Writs to the
Louisiana Supreme Court was denied. OLOL's Application to the Louisiana Supreme
Court is presently being briefed. The Petition does not set forth the amount of
damages being claimed, and there has been no discovery of the issue of damages.
However, in a brief filed in the appellate court, OLOL claimed in it would cost
in excess of $20,000,000 to repair the damages.
In August, 1992, OLOL filed suit against Sun Company, Inc. ("Sun") in
OUR LADY OF THE LAKE HOSPITAL, INC. VS. SUN COMPANY, INC.; No. 384,867,
Division "I", Nineteenth Judicial District Court, Parish of East Baton Rouge,
Louisiana, asserting allegations similar to the allegations in No. 373,498,
described above, and seeking to recover alleged damages
<PAGE> 7
13
RPM, INC. AND SUBSIDIARIES
--------------------------
PART II - OTHER INFORMATION
---------------------------
to the structural steel of the OLOL hospital. The suit alleges that the former
Carboline Company, a Missouri corporation, ("Carboline Missouri") manufactured
and supplied the Pyrocrete to OLOL and thereafter merged with Sun in 1980, with
Sun remaining as the surviving corporation responsible for the obligations of
Carboline Missouri. On June 29, 1993 OLOL filed a First Supplemental and
Amending Petition ("Amended Petition") which added Carboline Missouri and
Carboline as additional defendents. The Amended Petition generally alleges that
Carboline damaged OLOL through fraud and also breached a contractual obligation
of service after the sale. The Amended Petition alleges that OLOL will incur
expenses and costs in excess of $20,000,000 to repair the damages.
Carboline has denied the allegations of both lawsuits and is
vigorously contesting them. Carboline's defense has been assumed by First
Colonial Insurance Company ("First Colonial"), a wholly-owned insurance
subsidiary of the Company. First Colonial is in the process of negotiating a
cost-sharing agreement with a group of Carboline's insurers to cover both
defense and indemnity relating to the OLOL lawsuits.
<PAGE> 1
EXHIBIT 99.4
RPM, INC. AND SUBSIDIARIES
--------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
YEAR ENDED 5/31/94
------------------
RESULTS OF OPERATIONS
- - ---------------------
The Company acquired Dynatron/Bondo Corporation in June 1993 and Stonhard,
Inc. in October 1993, both on a pooling-of-interests basis. Dynatron/Bondo
is a $45 million supplier of automotive repair products for both the
professional and consumer after-markets, complementing the Company's Talsol
line of specialty automotive repair coatings. Stonhard is a $110 million
worldwide leader of industrial and commercial polymer flooring and related
products, having synergy with other of the Company's existing industrial
product lines. Prior years' results have been restated to reflect these
poolings (refer to Note A). The successful assimilation of these companies
during the year produced operating results more indicative of future
expectations as well as when compared to prior years on an unrestated basis.
The Company's operating results for fiscal 1994 again achieved record levels
as sales and net income climbed 6% and 33%, respectively. This compares with
fiscal 1993 when sales had grown 13% and earnings increased 3% over fiscal
1992. Over the past ten years, the Company's sales and
<PAGE> 2
2
-
earnings have grown at compounded annual rates of 14% and 18%, respectively.
Core businesses accounted for 80% of the current year's sales growth, nearly
split between industrial and consumer, reflecting primarily unit growth as
pricing adjustments continue to be minor. Acquisitions, primarily of Day-Glo
Color Corp. in October 1991 and Martin Mathys N.V. in March 1992, accounted
for nearly 60% of the sales growth during 1993. Existing businesses grew
approximately 6% during 1993 generating the remaining 40% of overall sales
growth that year.
The Company's gross profit margin has remained stable over the past two years
with the current year at 41.6% and the prior year at 41.7%. Planned
improvements in product mix and plant efficiencies, mainly among industrial
businesses, along with prior year plant restructuring at Dynatron/Bondo were
offset by certain temporarily higher raw material costs in consumer business.
Other raw material prices have remained fairly stable over the past three
years and similar results are expected during fiscal 1995. The introduction
of a new product line at Stonhard in 1992 was the principal cause of the
change in gross profit margin in 1993.
<PAGE> 3
3
-
The Company's selling, general and administrative expenses have changed as
a percentage of sales over the past three years from 30.7% in 1992 to 30.8%
in 1993 to 29.2% in 1994. These differences were essentially brought about
by the adjustment of both Dynatron/Bondo and Stonhard from Subchapter S
status and the incurrence of approximately $3 million in restructuring
charges at Stonhard's foreign operations in 1993. This category further
reflects the benefits of higher sales and planned expense reductions offset
in part by reduced joint venture income over the years presented. The
Company had adopted Statement of Financial Accounting Standards (SFAS) No.
106 "Employer's Accounting for Post-Retirement Benefits Other Than Pensions"
(Refer to Note H) in 1993. Environmental obligations have been appropriately
addressed and related expenditures have been and are expected to continue to
be immaterial.
In June 1993, the Company called for the redemption of the $50 million 6.75%
Convertible Subordinated Eurobond Debentures due 2005 (more fully discussed
under Capital Resources and Liquidity), accounting for $3 million of the
decline in net interest expense in 1994. The lower rate refinancing of debt
assumed through the Stonhard acquisition reduced interest expense
approximately $1 million. The interest savings from generally lower interest
rates, primarily in Europe, were offset by the accrued interest accretion on
the Liquid Yield Option Notes(TM) (LYONs(TM)) due 2012 (Refer to Note B).
During
<PAGE> 4
4
-
1993, net interest expense had increased by $.7 million reflecting $2.3
million of additional interest costs associated with borrowing to finance
acquisitions during that year, offset by $1.6 million of reduced interest
expense from lower interest rates and debt reduction.
The tax attributes of the Dynatron/Bondo and Stonhard acquisitions had
historically passed through to the respective shareholders as Subchapter S
Corporations. Consequently, on a restatement basis, this year's 40.3%
provision for income taxes (Refer to Note C) equals last year's when, in
fact, the new tax laws, growth of foreign income at comparatively higher tax
rates and an upward trend in state and local taxes would have otherwise
caused the 1994 effective tax rate to increase (41.5% in 1994 compared with
40.5% in 1993). Accordingly, the effective tax rate in 1995 is expected to
increase by 2% to 3%. The pooled acquisitions had a more significant impact
on the 1992 effective tax rate of 37.0%. The Company had adopted SFAS No.
109 "Accounting for Income Taxes" during 1993.
Primarily as a result of product mix, cost reductions, and eliminations
reflected upon pooling, along with higher sales and the income tax benefits
associated with the acquisitions, the net income margin improved to 6.5% from
5.1% in 1993 and 5.7% in 1992. The July 1993 Eurobond conversion impacted
1994 primary earnings per share by $.02.
<PAGE> 5
5
-
Comparative net income levels of the European operations have been affected
by the restatement required by the Stonhard acquisition. Significant
restructuring had taken place at Stonhard Europe in recent years and
accordingly future results are expected to show improvement. The Company's
European and other foreign sales are impacted from time to time as a result
of currency fluctuations. Comparative strengthening of the dollar against
European and Canadian currencies over the past year had a $9 million negative
impact on reported sales. Foreign acquisition debt is denominated in the
respective foreign currency, thereby limiting the impact on earnings of
transaction losses, and protecting against foreign currency rate risk.
Subsequent to year end, the Company purchased Rust-Oleum Corporation on June
28, 1994 (Refer to Note L). Rust-Oleum is the leading North American
producer of consumer rust-preventative coatings with nearly two-thirds of its
$140 million in sales generated in consumer and the balance in industrial
products. Both lines will highly complement the Company's existing product
lines. Rust-Oleum is expected to be anti-dilutive in the 1995 fiscal year.
<PAGE> 6
6
-
CAPITAL RESOURCES AND LIQUIDITY
- - -------------------------------
CASH PROVIDED FROM OPERATIONS
-----------------------------
The Company generated cash from operations of $51 million in 1994 compared
with $62 million in 1993. Although net income increased $13 million and
non-cash items exceeded 1993 by $4 million, current liabilities were reduced
by $28 million. A substantial portion of this reduction in current
liabilities is the result of year end timing of certain payments. In
addition, $3 million in short term borrowings in place at the end of 1993
were paid in 1994 and, with the acquisitions of Dynatron/Bondo and Stonhard,
cash became available to reduce certain other outstanding current
liabilities.
INVESTING ACTIVITIES
--------------------
Every year the Company invests in capital expenditures to primarily improve
production and distribution efficiency and capacity. Such expenditures
generally do not exceed depreciation and amortization in a given year. The
Company's capital expenditures amounted to $20 million in 1994, an increase
of $2 million from 1993. In addition, $5.7 million was expended for a
building and equipment in conjunction with the acquisition of Dynatron/Bondo.
The Company additionally acquired one small business and a product line from
another company in 1994 totalling $4 million. This compares with 1993
<PAGE> 7
7
-
when there was one purchase acquisition for $10 million. The Company
historically has acquired complementary businesses and this trend is expected
to continue.
FINANCING ACTIVITIES
--------------------
In June 1993, the Company called for the redemption of the $50 million 6.75%
Convertible Subordinated Eurobond Debentures due 2005 at the restated per
share price of $13.60. All bond holders had exercised their conversion
rights by the end of July 1993. As a result, the Company's balance sheet
reflected a $50 million reduction of long-term debt and a corresponding
increase in shareholders' equity.
The Company entered into a $10 million revolving credit agreement in June
1993 in association with the acquisition of Dynatron/Bondo. In October 1993,
this facility was increased to $55 million to refinance debt assumed through
the acquisition of Stonhard. There was $45 million of this line outstanding
at May 31, 1994. In addition, the Company increased the multi-currency
revolver to $30 million from $22 million in 1993 to finance the final
payments to former shareholders of Martin Mathys, acquired in 1992.
Long-term debt increased by an additional $7.8 million in 1994 as a result
of accrued interest accreted on the LYONs(TM) issue. The reduction of
interest payments in 1994 reflects the non-
<PAGE> 8
8
-
cash aspects of this interest. LYONs(TM) interest to be accreted in 1995
will be $8.2 million.
Subsequent to 1994, the Company entered into a $300 million revolving credit
agreement with a syndicate of nine banks. Of the initial $233 million drawn
on this line, $176.5 million was used to finance the purchase of Rust-Oleum
Corporation in June 1994 with the remaining $56.5 million used to retire the
$47 million balance of the $55 million revolving credit agreement and to
refinance certain acquired Rust-Oleum debt.
The Company's debt to capital ratio improved to 42.6% from 51.5% at May 31,
1993, but will increase to approximately 56% by the end of the first quarter
of 1995 as a result of the Rust-Oleum acquisition. Working capital increased
to $227 million from $192 million a year ago, with the current ratio
increasing to 3.1:1 from 2.4:1. These latter changes are largely the result
of the 1994 payment of $18 million of debt associated with the acquisition of
Martin Mathys.
The Company maintains excellent relations with its banks and other financial
institutions to further enable the financing of future growth opportunities.
(TM)Trademark of Merrill Lynch & Company, Inc.
<PAGE> 1
EXHIBIT 99.5
RPM, INC. AND SUBSIDIARIES
--------------------------
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
MAY 31, 1994
------------
<PAGE> 2
Independent Auditor's Report
----------------------------
The Board of Directors and
Shareholders
RPM, Inc.
Medina, Ohio
We have audited the accompanying consolidated balance sheets of RPM,
Inc. and Subsidiaries as of May 31, 1994 and 1993, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the years
in the three year period ended May 31, 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of RPM,
Inc. and Subsidiaries at May 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the years in the three year period
ended May 31, 1994, in conformity with generally accepted accounting
principles.
Cleveland, Ohio
July 8, 1994
<PAGE> 3
<TABLE>
RPM, INC. AND SUBSIDIARIES
--------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(In thousands except per share amounts)
ASSETS
------
<CAPTION>
May 31
---------------------------------
1994 1993
-------- --------
(Restated)
<S> <C> <C>
Current Assets
Cash and short-term cash investments $ 18,370 $ 22,885
Marketable securities, at cost (Note A) 7,029 4,654
Trade accounts receivable (less allowances
of $8,148 in 1994 and $6,901 in 1993) 162,256 159,232
Inventories (Note A) 130,487 126,948
Prepaid expenses and other current assets 16,388 17,093
-------- --------
Total current assets 334,530 330,812
-------- --------
Property, Plant and Equipment, At Cost (Note A)
Land 14,677 14,237
Buildings and leasehold improvements 96,019 87,954
Machinery and equipment 152,498 140,550
-------- --------
263,194 242,741
Less allowance for depreciation and
amortization 112,160 99,152
-------- --------
Property, plant and equipment, net 151,034 143,589
-------- --------
Other Assets
Cost of businesses over net assets
acquired, net of amortization (Note E) 111,598 108,386
Other intangible assets, net of amortization
(Note E) 25,328 31,208
Equity in unconsolidated affiliates (Note J) 12,509 12,103
Other 25,839 22,426
-------- --------
Total other assets 175,274 174,123
-------- --------
Total Assets $660,838 $648,524
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 4
<TABLE>
RPM, INC. AND SUBSIDIARIES
--------------------------
CONSOLIDATED BALANCE SHEETS (CONTINUED)
---------------------------------------
(In thousands except per share amounts)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<CAPTION>
May 31
---------------------------------
1994 1993
-------- --------
(Restated)
<S> <C> <C>
Current Liabilities
Notes and accounts payable $ 49,109 $ 58,474
Current portion of long-term debt (Note B) 1,196 21,262
Accrued compensation and benefits 24,492 21,538
Accrued warranty and loss reserves 12,978 13,753
Other accrued liabilities 18,042 16,848
Income taxes payable (Notes A and C) 1,719 7,065
-------- --------
Total current liabilities 107,536 138,940
-------- --------
Long-Term Debt, Less Current Maturities (Note B) 233,039 258,712
-------- --------
Deferred Income Taxes and Other (Notes A and C) 5,787 6,973
-------- --------
Shareholders' Equity
Common shares, stated value $.023 per share;
authorized 100,000,000 shares, issued and
outstanding 56,751,000; 53,000,000 in 1993
(Note D) 1,291 1,206
Paid-in capital 146,109 96,514
Cumulative translation adjustment (Note A) (2,290) (673)
Retained earnings 169,366 146,852
-------- --------
Total shareholders' equity 314,476 243,899
-------- --------
Total Liabilities And Shareholders' Equity $660,838 $648,524
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 5
<TABLE>
RPM, INC. AND SUBSIDIARIES
--------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(In thousands except per share amounts)
<CAPTION>
Year Ended May 31
----------------------------------
1994 1993 1992
-------- -------- --------
(Restated) (Restated)
<S> <C> <C> <C>
Net Sales $815,598 $768,372 $680,091
Cost of Sales 476,146 448,079 393,677
-------- -------- --------
Gross Profit 339,452 320,293 286,414
Selling, General and Administrative
Expenses 237,931 236,955 208,822
Interest Expense, Net 13,427 17,202 16,491
-------- -------- --------
Income Before Income Taxes 88,094 66,136 61,101
Provision for Income Taxes (Note C) 35,454 26,638 22,620
-------- -------- --------
Net Income $ 52,640 $ 39,498 $ 38,481
======== ======== ========
Average shares outstanding (Note D) 56,717 53,267 52,790
====== ====== ======
Earnings per common share and common
share equivalents (Note D) $.93 $.74 $.73
==== ==== ====
Earnings per common share assuming
full dilution (Note D) $.89 $.72 $.72
==== ==== ====
Cash dividends per common share $.51 $.47 $.44
==== ==== ====
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 6
<TABLE>
RPM, INC. AND SUBSIDIARIES
--------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
(In thousands except per share amounts)
<CAPTION>
Common Stock
------------------------
Cumulative
Number Stated Paid-In Translation Retained
Of Shares Value Capital Adjustment Earnings Total
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(Note D)
Balance at May 31, 1991 (Restated) $ 52,290 $ 1,190 $ 97,752 $ (241) $ 116,064 $ 214,765
Net income 38,481 38,481
Dividends paid (20,685) (20,685)
Sub S Corp. income 4,014 (4,014)
Sub S Corp. distributions (1,004) (1,004)
Stock option exercises 90 2 497 499
Business combinations 475 11 700 711
Translation adjustments 593 593
---------- ---------- ---------- ---------- ---------- ----------
Balance at May 31, 1992 (Restated) 52,855 1,203 101,959 352 129,846 233,360
Net income 39,498 39,498
Dividends paid (63) (22,370) (22,433)
Sub S Corp. income 122 (122)
Sub S Corp. distributions (6,040) (6,040)
Stock option exercises 145 3 661 664
Amendment of Articles (125) (125)
Translation adjustments (1,025) (1,025)
---------- ---------- ---------- ---------- ---------- ----------
Balance at May 31, 1993 (Restated) 53,000 1,206 96,514 (673) 146,852 243,899
Net income 52,640 52,640
Dividends paid (27,949) (27,949)
Sub S Corp. income 2,177 (2,177)
Sub S Corp. distributions (1,614) (1,614)
Stock option exercises 75 1 566 567
Conversion of debt 3,676 84 48,466 48,550
Translation adjustments (1,617) (1,617)
---------- ---------- ---------- ---------- ---------- ----------
Balance at May 31, 1994 $ 56,751 $ 1,291 $ 146,109 $ (2,290) $ 169,366 $ 314,476
========== ========== ========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 7
<TABLE>
RPM, INC. AND SUBSIDIARIES
----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(In thousands except per share amounts)
<CAPTION>
Year Ended May 31
----------------------------------------------
1994 1993 1992
-------- -------- --------
(Restated) (Restated)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 52,640 $ 39,498 $ 38,481
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 25,905 22,283 20,436
Reduction in note receivable 600
Increase (decrease) in deferred
liabilities (916) (254) 761
(Earnings) loss of unconsolidated
affiliates (1,732) (2,303) (3,749)
Distribution from joint venture 1,220 1,000 1,000
Changes in assets and liabilities, net of ef-
fect from purchases and sales of businesses:
(Increase) in marketable securities (2,375) (316) (4,338)
(Increase) in accounts and notes
receivable (1,066) (8,112) (1,847)
(Increase) in inventory (2,195) (733) (2,113)
(Increase) in prepaid expenses and non-
current assets (7,198) (4,582) (2,206)
Increase (decrease) in accounts payable (9,985) 7,975 (1,121)
Increase (decrease) in accrued liabilities (2,034) 8,052 (68)
Other (781) (858) (216)
-------- -------- --------
51,483 61,650 45,620
-------- -------- --------
Cash Flows From Investing Activities:
Capital expenditures (25,700) (18,320) (17,802)
Acquisition of new businesses, net of cash
acquired (4,094) (10,161) (125,307)
-------- -------- --------
(29,794) (28,481) (143,109)
-------- -------- --------
Cash Flows From Financing Activities:
Additions to long-term debt 72,320 147,496 204,102
Reductions of long-term debt and short-term
debt (69,528) (153,655) (77,059)
Cash dividends paid (30,126) (27,855) (21,804)
Exercise of stock options 567 664 499
Other 563 (1,282) (571)
-------- -------- --------
(26,204) (34,632) 105,167
-------- -------- --------
Net Increase (Decrease) in Cash (4,515) (1,463) 7,678
Cash at Beginning of Year 22,885 24,348 16,670
-------- -------- --------
Cash at End of Year $ 18,370 $ 22,885 $ 24,348
======== ======== ========
</TABLE>
<PAGE> 8
<TABLE>
RPM, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
-------------------------------------------------
(In thousands except per share amounts)
<CAPTION>
Year Ended May 31
---------------------------------------------
1994 1993 1992
-------- -------- --------
(Restated) (Restated)
<S> <C> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 7,461 $ 13,646 $ 17,443
Income taxes 37,708 25,401 23,116
Supplemental Schedule of Non-cash Investing
and Financing Activities:
Conversion from debt to equity 48,550
Interest accreted on LYONs 7,812 4,999
</TABLE>
Disclosure of accounting policy:
- - -------------------------------
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.
See Notes to Consolidated Financial Statements.
<PAGE> 9
RPM, INC. AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
MAY 31, 1994, 1993 AND 1992
---------------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- - ---------------------------------------------------
(1) Principles of Consolidation
The consolidated financial statements include the accounts of
RPM, Inc. and its wholly owned domestic and foreign
subsidiaries. The Company accounts for its investment in less
than majority owned joint ventures under the equity method.
Intercompany accounts, transactions and unrealized profits and
losses are eliminated in consolidation.
Certain reclassifications have been made to prior year amounts
to conform with the current year presentation.
(2) Business Combinations
On June 8, 1993, the Company acquired all the outstanding
shares of Dynatron/Bondo Corporation in exchange for 2,118,000
shares of the Company's common stock. Dynatron/Bondo
Corporation, located in Atlanta, Georgia, is a manufacturer of
auto and marine body filler and related products.
On October 26, 1993, the Company acquired all the outstanding
shares of Stonhard, Inc. in exchange for 3,560,000 shares of
the Company's common stock. Stonhard, Inc., located in Maple
Shade, New Jersey, is a manufacturer of polymer-based
floorings, linings and construction products.
Both acquisitions have been accounted for as poolings of
interests. Accordingly, historical financial data presented
in this report has been restated to include the accounts and
transactions of Dynatron/Bondo Corporation and Stonhard, Inc.
as though both were acquired as of June 1, 1991. The
following table reconciles combined net sales and net income
of the separate companies for the two years ended May 31, 1993
and the six months ended November 30, 1993:
<TABLE>
<CAPTION>
Year Ended
June 1, 1993 May 31
Through --------------------------------
November 30, 1993 1993 1992
----------------- -------- --------
<S> <C> <C> <C>
(In thousands)
Net Sales
---------
RPM, Inc. $336,902 $625,680 $552,092
Dynatron/Bondo 22,874 48,828 45,191
Stonhard, Inc. 51,814 93,864 82,808
-------- -------- --------
Combined $411,590 $768,372 $680,091
======== ======== ========
Net Income
----------
RPM, Inc. $ 25,066 $ 39,376 $ 34,467
Dynatron/Bondo 1,952 2,925 3,721
Stonhard, Inc. 2,177 (2,803) 293
-------- -------- --------
Combined $ 29,195 $ 39,498 $ 38,481
======== ======== ========
</TABLE>
<PAGE> 10
RPM, INC. AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
MAY 31, 1994, 1993 AND 1992
---------------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
- - ---------------------------------------------------
(2) Business Combinations - Continued
In addition, during the two year period ended May 31, 1994,
the Company completed several acquisitions accounted for by
the purchase method of accounting.
The difference of approximately $2,200,000 between the fair
value of net assets acquired and the primarily cash purchase
consideration of $14,300,000 has been allocated to goodwill.
The assets, liabilities and operating results of these
companies are reflected in the Company's financial statements
from their respective dates of acquisition forward.
The following data summarizes, on an unaudited pro-forma
basis, the combined results of operations of the Company and
the businesses acquired accounted for by the purchase method
of accounting for the year ended May 31, 1993. These
pro-forma amounts give effect to appropriate adjustments
resulting from the combination, but are not necessarily
indicative of future results of operations or of what results
would have been for the combined companies:
<TABLE>
<CAPTION>
May 31, 1993
------------
(Unaudited)
(In thousands except
per share amounts)
<S> <C>
Net Sales $775,121
========
Net Income $ 39,991
========
Earnings per common share and common
share equivalent $.75
====
Earnings per common share assuming
full dilution $.72
====
</TABLE>
There were no significant acquisitions accounted for by the
purchase method of accounting during the year ended May 31,
1994, therefore pro-forma amounts are not presented.
(3) Foreign Currency
For the periods presented, assets and liabilities have been
translated using exchange rates prevailing at year end.
Income and expense for the periods have been translated using
an average exchange rate. The resulting translation
adjustments have been recorded in shareholders' equity and
will be included in net earnings only upon the sale or
liquidation of the underlying foreign investment, which is not
contemplated at this time. Transaction gains and losses have
been immaterial during the past three fiscal years.
(4) Marketable Securities
Marketable securities are included in the accompanying
consolidated balance sheets at cost, which approximates market.
<PAGE> 11
RPM, INC. AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
MAY 31, 1994, 1993 AND 1992
---------------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
- - ---------------------------------------------------
(5) Inventories
Inventories are stated at the lower of cost or market, cost
being determined substantially on a first-in, first-out (FIFO)
basis and market being determined on the basis of replacement
cost or net realizable value. Inventory costs include raw
material, labor and manufacturing overhead. Inventories were
composed of the following major classes:
<TABLE>
<CAPTION>
May 31
----------------------------------
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Raw material and supplies $ 45,286 $ 46,716
Finished goods 85,201 80,232
-------- --------
Total Inventory $130,487 $126,948
======== ========
</TABLE>
(6) Depreciation
Depreciation is computed over the estimated useful lives of
the assets primarily using the straight-line method. The
annual depreciation rates are based on the following ranges of
useful lives:
Land improvements 5 to 25 years
Buildings and improvements 10 to 50 years
Machinery and equipment 3 to 20 years
(7) Income Taxes
The Company and its wholly owned domestic subsidiaries file a
consolidated federal income tax return. The tax effects of
transactions are recognized in the year in which they enter
into the determination of net income, regardless of when they
are recognized for tax purposes. As a result, income tax
expense differs from actual taxes payable. The accumulation
of these differences at May 31, 1994, is shown as a noncurrent
liability of $4,533,000 ($5,896,000 at May 31, 1993). The
Company does not intend to distribute the accumulated earnings
of consolidated foreign subsidiaries amounting to $22,234,000
at May 31, 1994, and $10,533,000 at May 31, 1993, and
therefore no provision has been made for the taxes which would
result if such earnings were remitted to the Company.
(8) Interest Expense, Net
Interest expense is shown net of investment income which
consists primarily of interest and dividends. Investment
income for the three years ended May 31, 1994 was $856,000,
$1,317,000 and $935,000, respectively.
(9) Research and Development
Research and development costs are charged to operations when
incurred and are included in operating expenses. The amounts
charged for the three years ended May 31, 1994, were
$11,081,000, $9,952,000 and $9,119,000, respectively. The
customer sponsored portion of such expenditures was not
significant.
<PAGE> 12
RPM, INC. AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
MAY 31, 1994, 1993 AND 1992
---------------------------
NOTE B - BORROWINGS
- - -------------------
<TABLE>
<CAPTION> May 31
----------------------------------
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
A description of long-term debt follows:
$400 million face value at maturity Liquid Yield
Option Notes (LYONs) due 2012. The 5.25% LYONs
are zero coupon subordinated notes currently
convertible at $19.80 ($18.80 at May 31, 1993)
and are redeemable by the holder for the issu-
ance price plus accrued original issue discount
in September 1997, 2002 and 2007. There are
7,813,000 shares reserved for the conversion
of this debt. $154,695 $146,883
Revolving credit agreement for $55,000,000 with
a bank through November 1, 1996 (refinanced in
June 1994). Interest, which is tied to one of
various rates, averaged 4.73% at May 31, 1994. 45,000 -
Debt of pooled entity subsequently refinanced
with proceeds from credit agreement described
above. - 36,995
Multi-currency revolving credit agreement for
$30,000,000 (with a 20% currency fluctuation
provision) with a bank through December 14, 1996,
representing a refinancing of a similar agree-
ment at May 31, 1993. Interest, which is tied
to one of various rates, is 5.61% on the
$15,157,257 Dutch Guilder component and 5.75%
on the $15,575,000 Belgian Franc component at
May 31, 1994. 30,732 22,117
6.75% Convertible Subordinated Debenture Euro-
bond Issue converted subsequent to May 31, 1993. - 50,000
Non-interest bearing notes payable in Belgian
Francs to former shareholders of a subsidiary
paid in June 1993 and March 1994. - 18,408
Other notes and mortgages payable at various
rates of interest due in installments through
2005, substantially secured by property. 3,808 5,571
-------- --------
234,235 279,974
Less current portion 1,196 21,262
-------- --------
Total long-term debt, less current maturities $233,039 $258,712
======== ========
</TABLE>
Additionally, at May 31, 1994, the Company had an unused short-term line of
credit with a bank for $15,000,000.
The aggregate maturities of long-term debt for the five years subsequent to
May 31, 1994, are as follows: 1995 - $1,196,000; 1996 - $564,000; 1997 -
$31,195,000; 1998 - $45,430,000; 1994 - $424,000.
<PAGE> 13
<TABLE>
RPM, INC. AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
MAY 31, 1994, 1993 AND 1992
---------------------------
NOTE C - TAXES
- - --------------
The provision for taxes on income includes the following:
<CAPTION>
Year Ended May 31
------------------------------------------------
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Federal income tax rate of 35% in 1994,
34% in 1993 and 1992, applied to
income before taxes $ 30,833 $ 22,486 $ 20,774
Increase (decrease) in taxes resulting
from:
Tax credits (439) (275) (222)
State and local taxes - net of federal
income tax benefit 3,705 3,326 2,434
Foreign taxes in excess of U.S. Federal
tax rate 1,282 870 118
Permanent differences between tax and
book basis, related to acquisitions 1,093 939 913
Difference between tax and book income,
related to pooled entities (1,137) (153) (1,463)
All other items, none of which exceed
5% of computed tax 117 (555) 66
-------- -------- --------
Actual tax expense $ 35,454 $ 26,638 $ 22,620
======== ======== ========
Actual tax rate 40.25% 40.27% 37.02%
====== ====== ======
The provision for income taxes consists of the following:
Current
Federal $ 24,674 $ 19,358 $ 17,116
State 5,700 5,040 3,688
Foreign 3,717 2,745 1,284
-------- -------- --------
34,091 27,143 22,088
Deferred
Federal 2,059 (493) 516
Foreign (696) (12) 16
-------- -------- --------
Actual tax expense $ 35,454 $ 26,638 $ 22,620
======== ======== ========
</TABLE>
Deferred income taxes result from timing differences in the recognition
of revenue and expense for book and tax purposes, primarily from the tax
timing differences of accelerated depreciation.
<PAGE> 14
RPM, INC. AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
MAY 31, 1994, 1993 AND 1992
---------------------------
NOTE D - COMMON SHARES
- - ----------------------
There are 100,000,000 common shares authorized with a stated value of
$.023 per share. At May 31, 1994 and 1993, there were 56,751,000 and
53,000,000 shares outstanding respectively, each of which is entitled to
one vote. See Consolidated Statements of Shareholders' Equity for more
information. Share data for May 31, 1993 and May 31, 1992, has been
restated to reflect the acquisitions of Dynatron/Bondo Corporation and
Stonhard, Inc. in which 5,678,000 common shares were exchanged for all
of the outstanding shares of the acquired companies in transactions
accounted for as poolings of interests.
Earnings per share are based on the weighted average number of common
shares and common share equivalents outstanding during each year
(56,717,000 in 1994, 53,267,000 in 1993 and 52,790,000 in 1992). In
computing such average number of shares outstanding, the number of
common shares was increased by common stock options with exercisable
prices lower than the average market prices of common shares during each
year and reduced by the number of shares assumed to have been purchased
with the proceeds from the exercise of the options.
The Company has options outstanding under two stock option plans, the
1979 Nonqualified Stock Option Plan, which, prior to its expiration in
September 1989, provided for the granting of options for up to 1,683,000
shares, and the 1989 Stock Option Plan, which provides for the granting
of options for up to 2,813,000 shares at a price equal to the fair
market value at the date of grant. These options are exercisable
cumulatively in equal annual installments commencing one year from the
grant date and have expiration dates ranging from February 1996 to
October 2003. At May 31, 1994, 1,795,000 shares (2,051,000 at May 31,
1993) were available for future grant.
Transactions during the two years are summarized as follows:
<TABLE>
<CAPTION>
Shares Under Option
---------------------------
1994 1993
-------- ---------
(In thousands)
<S> <C> <C>
Outstanding, beginning of year 1,084 1,070
Granted during the year 256 267
Expired during the year (4) (32)
Exercised during the year (at prices
ranging from $3.84 to $16.66 per share) (84) (221)
-------- --------
Outstanding, end of year (at an average
price of $12.99 ranging from $3.84 to
$18.00 per share) 1,252 1,084
======== ========
Exercisable, end of year (at an average
price of $10.35 ranging from $3.84 to
$16.67 per share) 656 526
======== ========
</TABLE>
<PAGE> 15
RPM, INC. AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
MAY 31, 1994, 1993 AND 1992
---------------------------
NOTE E - INTANGIBLES
- - --------------------
The excess of cost over the underlying value of the net assets of
companies acquired is being amortized on the straight-line basis,
primarily over forty years. Amortization expense charged to operations
for the three years ended May 31, 1994 was $3,688,000, $3,265,000 and
$3,070,000, respectively. Cost of businesses over net assets acquired
is shown net of accumulated amortization of $20,007,000 at May 31, 1994
($16,316,000 at May 31, 1993).
The cost of formulas, trademarks and other intangibles acquired are
being amortized on the straight-line basis over their estimated lives,
ranging generally from ten to forty years. Amortization expense charged
to operations for the three years ended May 31, 1994, was $1,142,000,
$1,960,000 and $1,596,000, respectively. Intangibles are shown net of
accumulated amortization of $7,859,000 at May 31, 1994 ($7,585,000 at
May 31, 1993).
NOTE F - LEASES
- - ---------------
At May 31, 1994, certain property, plant and equipment were leased by
the Company under long-term leases. Certain of these leases provide for
increased rental based upon an increase in the cost-of-living index.
Future minimum lease commitments as of May 31, 1994, for all
noncancellable leases are as follows:
<TABLE>
<CAPTION>
<S> <C>
May 31 (In thousands)
------ --------------
1995 $ 3,708
1996 2,808
1997 2,294
1998 1,664
1999 677
Thereafter -
--------
Total minimum lease commitments $ 11,151
========
</TABLE>
Rental expenses for all operating leases totalled $5,873,000 in 1994,
$5,777,000 in 1993 and $5,290,000 in 1992. Capitalized leases were
insignificant for the three year period ended May 31, 1994.
NOTE G - RETIREMENT PLANS
- - -------------------------
To provide uniform retirement income for its non-union employees, the
Company has a defined benefit retirement plan in which substantially all
non-union employees participate. The Retirement Plan is a
non-contributory plan fully paid for by the Company, with accrued
benefits vesting after five years of service. This plan provides
benefits that are based on years of service and average compensation.
Benefits for union employees are provided by separate plans and are
generally based on years of service. The Company's funding policy is to
contribute annually an amount that can be deducted for federal income
tax purposes using a different actuarial cost method and different
assumptions from these used for financial reporting.
<PAGE> 16
RPM, INC. AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
MAY 31, 1994, 1993, AND 1992
----------------------------
NOTE G - RETIREMENT PLANS - Continued
- - -------------------------
The net periodic pension cost for the three years ended May 31, 1994,
included the following components:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Service cost - Benefits earned during
the period $ 2,750 $ 2,087 $ 2,370
Interest cost on projected benefit
obligations 2,171 1,919 1,408
Actual return on plan assets (1,678) (1,783) (954)
Net amortization and deferral (514) 536 103
-------- -------- --------
Net pension cost $ 2,729 $ 2,759 $ 2,927
======== ======== ========
</TABLE>
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of the projected benefit
obligations were 7.5% (8.5% for May 31, 1993) and 5%, respectively. The
expected long-term rate of return on assets was 8.5% (8.0% for May 31,
1993 and 1992). The plans' assets consist primarily of stocks, bonds
and fixed income securities.
The following table sets forth the funded status of the Company's
pension plans and the amounts reflected in the accompanying balance
sheets:
<TABLE>
<CAPTION>
May 31
----------------------------
1994 1993
-------- -------
(In thousands)
<S> <C> <C>
Actuarial present value of projected benefit
obligation:
Vested employees $ 22,174 $ 16,398
Nonvested employees 1,223 1,053
-------- --------
Accumulated benefit obligation 23,397 17,451
Additional amount related to projected
salary increases 7,530 5,195
-------- --------
Total projected benefit obligation 30,927 22,646
Funded assets at fair value 24,003 24,523
-------- --------
Projected benefit obligation less than (in
excess of) assets (6,924) 1,877
Unamortized net (asset) existing at date of
adoption (657) (727)
Unrecognized prior service cost 1,477 1,278
Unrecognized net loss 5,511 14
-------- --------
Prepaid (accrued) pension cost $ (593) $ 2,442
======== ========
</TABLE>
Some subsidiaries have non-contributory, qualified defined contribution
plans and other subsidiaries contribute to multi-employer plans for
their collective bargaining groups. Contributions to these plans were
immaterial for the three year period ended May 31, 1994. In addition,
the Company maintains a non-contributory 401(K) Plan for substantially
all non-union employees in the United States.
<PAGE> 17
RPM, INC. AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
MAY 31, 1994, 1993 AND 1992
---------------------------
NOTE H - POSTRETIREMENT HEALTH CARE BENEFITS
- - --------------------------------------------
In addition to the defined benefit pension plan, the Company also
provides health care benefits to certain of its retired employees
through unfunded plans. Employees become eligible for these benefits if
they meet minimum age and service requirements. The Company elected to
recognize its transition obligation upon adoption of SFAS No. 106 in
1993. The components of this expense for the years ended May 31, 1994
and May 31, 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Immediate recognition of transition
obligation $ - $ 1,091
Service cost - Benefits earned during
the period - 10
Interest cost on the accumulated obligation 199 199
-------- --------
Net periodic postretirement expense $ 199 $ 1,300
======== ========
The accumulated postretirement obligation recognized in the May 31, 1994 and May 31, 1993 balance sheets are comprised of
the following components:
Current retirees $ 2,314 $ 2,222
Future retirees 282 356
-------- --------
Accumulated postretirement benefit
obligation $ 2,596 $ 2,578
======== ========
</TABLE>
An 8% discount rate was used in determining the accumulated
postretirement benefit obligation. A 13% increase in the cost of
covered health care benefits was assumed for fiscal 1994. This rate is
assumed to decrease incrementally to 6% after several years and remain
at that level thereafter except for various union plans which will cap
at alternate benefit levels. An 1% increase in the health care costs
trend rate would have increased the accumulated postretirement benefit
obligation as of May 31, 1994 by $151,000 and the net postretirement
expense by $12,000.
NOTE I - CONTINGENCIES
- - ----------------------
The Company is a party to various legal and environmental actions which
have arisen in the ordinary course of business. Environmental
expenditures caused by current or past operations are expensed while
expenditures relating to future operations are capitalized. The Company
records liabilities when costs are probable and can be reasonably
estimated. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
<PAGE> 18
RPM, INC. AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
MAY 31, 1994, 1993 AND 1992
---------------------------
NOTE J - INDUSTRY SEGMENT AND GEOGRAPHIC AREA INFORMATION
- - ---------------------------------------------------------
The Company operates principally in one business segment -- the
manufacture and sale of protective coatings.
Information concerning the Company's operations in different
geographical areas of the Company's business at May 31, 1994, 1993 and
1992 and for the years then ended is summarized as follows:
<TABLE>
<CAPTION>
Other
United European Foreign Corporate
States Operations Operations Office Total
-------- ---------- ---------- --------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Net Sales
- - ---------
May 31, 1994 $714,968 $ 71,912 $ 28,718 $815,598
May 31, 1993 659,795 77,628 30,949 768,372
May 31, 1992 597,398 53,778 28,915 680,091
Net Income
- - ----------
May 31, 1994 60,805 502 80 $ (8,747) 52,640
May 31, 1993 51,628 (2,938) (1,242) (7,950) 39,498
May 31, 1992 47,089 (1,118) 240 (7,730) 38,481
Assets Employed
- - ---------------
May 31, 1994 494,541 112,545 15,899 37,853 660,838
May 31, 1993 497,290 96,933 14,828 39,473 648,524
May 31, 1992 479,786 93,019 16,222 34,319 623,346
</TABLE>
The above sales do not include approximately $83,000,000 of product
sales through joint ventures and licensees worldwide.
Export sales were less than 10% of total consolidated revenue for each
of the three years.
<PAGE> 19
RPM, INC. AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
MAY 31, 1994, 1993 AND 1992
---------------------------
NOTE K - INTERIM FINANCIAL INFORMATION (Unaudited)
- - --------------------------------------
The following is a summary of the unaudited quarterly results of
operations for the years ended May 31, 1994 and 1993:
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------
August 31 November 30 February 28 May 31
--------- ----------- ----------- --------
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
1994
----
Net Sales $209,347 $202,243 $186,562 $217,446
-------- -------- -------- --------
Gross Profit 89,514 84,777 75,437 89,724
-------- -------- -------- --------
Net Income 15,262 13,933 6,565 16,880
-------- -------- -------- --------
Primary Earnings Per
Share $.27 $.25 $.12 $.30
==== ==== ==== ====
Fully Diluted Earnings
Per Share $.25 $.23 $.12 $.28
==== ==== ==== ====
1993
----
Net Sales $202,871 $184,736 $177,085 $203,680
-------- -------- -------- --------
Gross Profit 84,070 77,471 71,714 87,038
-------- -------- -------- --------
Net Income 12,484 9,629 3,039 14,346
-------- -------- -------- --------
Primary Earnings Per
Share $.23 $.18 $.06 $.27
==== ==== ==== ====
Fully Diluted Earnings
Per Share $.22 $.18 $.06 $.25
==== ==== ==== ====
<FN>
The computation of fully diluted earnings per share reflects
additional shares issuable assuming conversion of convertible securities.
Quarterly earnings per share do not total to the earnings per share
due to the weighted average number of shares outstanding in each
quarter.
</TABLE>
<PAGE> 20
RPM, INC. AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
MAY 31, 1994, 1993 AND 1992
---------------------------
NOTE L - SUBSEQUENT EVENTS
- - --------------------------
On June 28, 1994, the Company acquired all the outstanding shares of
Rust-Oleum Corporation for $176,500,000 in cash. Rust-Oleum
manufactures and markets primarily rust-preventative coatings for the
consumer market. This acquisition will be accounted for by the
purchase method of accounting and the difference of $85,000,000
between the fair value of net assets acquired and the purchase
consideration will be allocated to goodwill. The Company's financial
statements will reflect the assets, liabilities and operating results
of Rust-Oleum from the date of acquisition forward.
Pro-forma amounts as if Rust-Oleum had been acquired on June 1, 1992,
are as follows:
<TABLE>
<CAPTION>
Year Ended May 31
------------------------------
1994 1993
-------- --------
(Unaudited)
(In thousands except per
share amounts)
<S> <C> <C>
Net Sales $955,845 $900,730
======== ========
Net Income $ 49,615 $ 33,419
======== ========
Earnings per common share and common
share equivalent $.87 $.63
==== ====
Earnings per common share assuming
full dilution $.84 $.62
==== ====
</TABLE>
Financing for the above acquisition, as well as the refinancing of
certain other debt including the $45,000,000 revolving credit
agreement discussed in Note B, is in the form of a $300,000,000
revolving credit agreement with nine banks dated June 28, 1994.
<PAGE> 21
EXHIBIT 99.5
RPM, INC.
---------
ANNUAL REPORT ON FORM 10-K
--------------------------
FOR THE FISCAL YEAR ENDED MAY 31, 1994
--------------------------------------
FINANCIAL STATEMENT SCHEDULES
-----------------------------
<PAGE> 22
6364 Pearl Road
Ciulla Stephens & Co. Cleveland, Ohio 44130
- - -----------------------------------------------------------------------------
Certified Public Accountants (216) 884-2036
Report of Independent Public Accountants
----------------------------------------
In connection with our examination of the consolidated financial statements
of RPM, Inc. and Subsidiaries at May 31, 1994 and May 31, 1993, and for each
of the three years in the period ended May 31, 1994 which report thereon
dated July 8, 1994 is incorporated by reference in this Annual Report
on Form 10-K, we also examined the financial statement schedules listed in the
accompanying index at Item 14(a)(2). In our opinion, these financial statement
schedules present fairly, when read in conjunction with the related
consolidated financial statements, the financial data required to be set forth
therein.
Cleveland, Ohio
July 8, 1994
<PAGE> 23
<TABLE>
RPM, INC. AND SUBSIDIARIES
--------------------------
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Schedule VIII
----------------------------------------------
(In thousands)
<CAPTION>
Additions
Charged To
Balance at Selling and Balance at
Beginning General and End
0f Period Administrative Acquisitions Deductions of Period
----------- ------------------ ---------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Year Ended May 31, 1994
- - ------------------------
Allowance for doubtful accounts $ 6,901 $ 4,184 $ 70 $ 3,007(1) $ 8,148
======== ======== ========== ========= ==========
Accrued warranty and loss reserves $ 13,753 $ 7,312 $ $ 8,087(2) $ 12,978
======== ======== ========== ========= ==========
Year Ended May 31, 1993
- - -----------------------
Allowance for doubtful accounts $ 5,586 $ 4,535 $ 192 $ 3,412(1) $ 6,901
======== ======== ========== ========= ==========
Accrued warranty and loss reserves $ 11,582 $ 5,704 $ 460 $ 3,993(2) $ 13,753
======== ======== ========== ========= ==========
Year Ended May 31, 1992
- - -----------------------
Allowance for doubtful accounts $ 3,801 $ 3,731 $ 777 $ 2,723(1) $ 5,586
======== ======== ========== ========= ==========
Accrued warranty and loss reserves $ 4,214 $ 6,983 $ 1,729 $ 1,344(2) $ 11,582
======== ======== ========== ========= ==========
<FN>
(1) Uncollectible accounts written off, net of recoveries
(2) Claims paid during the year
</TABLE>
<PAGE> 24
<TABLE>
RPM, INC. AND SUBSIDIARIES
--------------------------
SHORT-TERM BORROWINGS Schedule IX
---------------------
(In thousands)
<CAPTION> Maximum Average Weighted
Amount Amount Average
Balance Weighted Outstanding Outstanding Interest
Category of Aggregate At End Average During During Rate During
Short-Term Borrowings Of Period Interest Rate The Period The Period The Period
- - ---------------------------- ----------- --------------- ---------------- -------------- -------------
(A) (B)
<CAPTION>
<S> <C> <C> <C> <C> <C>
May 31, 1994
- - -----------------
Notes payable to banks None None $ 4,000 $ 1,025 4.1%
May 31, 1993
- - -----------------
Notes payable to banks $ 3,200 4.0% $ 9,000 $ 1,808 4.5%
May 31, 1992
- - ------------------
Notes payable to banks None None None None None
<FN>
Note A: Average amount outstanding during the period is computed by dividing
the total of mid-month outstanding principle balances by 365.
Note B: Average interest rate for the year is computed by dividing actual
short-term interest expense by the average short-term debt outstanding.
</TABLE>
<PAGE> 25
<TABLE>
RPM, INC. AND SUBSIDIARIES
---------------------------
SUPPLEMENTAL INCOME STATEMENT INFORMATION Schedule X
-----------------------------------------
(In thousands)
<CAPTION>
For The Year Ended May 31
------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C> <C>
1. Maintenance and repairs A A A
2. Amortization of intangible assets A A A
3. Taxes, other than payroll and income A A A
4. Royalties A A A
5. Advertising costs $8,137 $7,845 $6,458
<FN>
A: Amounts not presented are less than 1% of net sales.
</TABLE>
